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RAILWAY A1AIL PAY 


PRELIMINARY REPORT 

SUBMITTED TO THE JOINT 
COMMITTEE ON 


POSTAGE ON SECOND-CLASS 
MAIL MATTER AND COMPENSATION FOR 
THE TRANSPORTATION OF MAIL 


OF THE 

CONGRESS OF THE UNITED STATES 

BY 

JONATHAN BOURNE, JR. 

CHAIRMAN 


JANUARY 24, 1913 


Printed for the use of the Joint Committee on Postage on 
Second-Class Mail Matter and Compensation 
for the Transportation of Mail 


WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1913 















RAILWAY MAIL PAY 


PRELIMINARY REPORT 


SUBMITTED TO THE JOINT 
COMMITTEE ON 



POSTAGE ON SECOND-CLASS 
MAIL MATTER AND COMPENSATION FOR 
THE TRANSPORTATION OF MAIL 


OF TIIE 


CONGRESS OF THE UNITED STATES 

BY 


JONATHAN BOURNE, JR. 

CHAIRMAN 


JANUARY 24, 1913 


Printed for the use of the Joint Committee on Postage on 
Second-Class Mail Matter and Compensation 
for the Transportation of Mail 


WASHINGTON 

GOVERNMENT PRINTING OFFICE 
1913 













JOINT COMMITTEE ON POSTAGE ON SECOND-CLASS MAIL MATTER 
AND COMPENSATION FOR THE TRANSPORTATION OF MAIL. 

Congress of the United States. 

Senators: Representatives : 

JONATHAN BOURNE, Jr., Chairman. JAMES T. LLOYD. 

HARRY A. RICHARDSON. WILLIAM E. TUTTLE, Jr. 

JOHN H. BANKHEAD. JOHN W. WEEKS. 

Robert H. Turner, Secretary. 

Richard B. Nixon, Disbursing Officer. 

2 


EL. OF D. - 
MAR 20 1913 



RAILWAY MAIL PAY. 


<3 


To the Joint Committee on Postage on Second-Class Mail Matter 

and Compensation for the Transportation of Mail: 

Gentlemen: The Post Office appropriation act approved August 
24, 1912, contained a provision reading as follows: 

Provided, That a joint committee shall be appointed composed of three mem¬ 
bers of the Senate Committee on Tost Offices and Post Roads and three members 
of the House Committee on the Post Office and Post Roads, to be designated 
by the respective chairmen, to make inquiry into the subject of postage on 
second-class mail matter and compensation for the transportation of mail and 
to report at the earliest practicable date, and for this purpose they are au¬ 
thorized, by subcommittee or otherwise, to sit during the sessions or recess of 
Congress, at such times and places as they may deem advisable, to send for 
persons and papers, to administer oaths, to summon and compel the attend¬ 
ance of witnesses, and to employ such clerical, expert, and stenographic assist¬ 
ance as shall be necessary; and to pay the necessary expenses of such inquiry 
there is hereby appropriated, out of any money in the Treasury not otherwise 
appropriated, the sum of twenty-five thousand dollars, to be paid out upon the 
audit and order of the chairman or acting chairman of said committee. 

On August 24, acting under authority of this provision, the Presi¬ 
dent of the Senate appointed on this joint committee Senators 
Jonathan Bourne, jr.. of Oregon; Harry A. Richardson, of Dela¬ 
ware; and John H. Bankhead, of Alabama. The Speaker of the 
House of Representatives on the same day appointed on the same 
committee James T. Lloyd, of Missouri; William E. Tuttle, jr., of 
New Jersey; and John W. Weeks, of Massachusetts. 

On August 26 Congress adjourned sine die and immediately 
almost all Members of Congress departed for their homes. Owing 
to the press of legislative business on the last two days of the session, 
there was no time for the organization of this joint committee and 
the formulation of a plan of procedure. 

On August 12, 1911, the Postmaster General transmitted a letter 
to the Speaker of the House of Representatives submitting “A report 
giving the results of the inquiry as to the operation, receipts, and 
expenditures of railroad companies transporting the mails and recom¬ 
mending legislation on the subject,” said letter and accompanying 
report being printed as House Document No. 105, Sixty-second Con¬ 
gress, first session. 

In response to representations made to the Senate Committee on 
Post Offices and Post Roads by the Post Office Department through 
the Second Assistant Postmaster General I was authorized by the 
committee to introduce a bill prepared by the Post Office Depart¬ 
ment embodying in legislative form the recommendations made in 
the document above referred to ; the purpose being to get before 
Congress and the country the views of the department relative to 

8 



4 


RAILWAY MAIL PAY. 


this important subject. I accordingly, on July 26, 1912, introduced 
S. 7371, a bill to provide the manner of determining the compensa¬ 
tion of railroads for the transportation of the mails, in the language 
following, to wit: 

Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled . That the Postmaster General shall 
determine tlie cost to each railroad company of carrying the mails on its re¬ 
spective road or roads, and shall verify and state the result in such form and 
manner as he shall deem proper. For this purpose he is authorized to credit, 
assign, and apportion the revenues and expenses of railroad companies so re¬ 
ported in such manner as he shall deem fair and equitable and in liis judgment 
necessary to ascertain the cost as near as practicable, a statement of which 
shall be given the company concerned. If any railroad company shall object to 
the method of crediting, assigning, and apportioning the revenues and expenses, 
it may file objection with the Postmaster General within twenty days after such 
statement is made to the company, and the Postmaster General shall thereupon 
certify the method and objection, and such papers as in his judgment may be 
essential to an understanding of the method, to the Interstate Commerce Com¬ 
mission, who shall review the finding of the Postmaster General and affirm, 
modify, or revise the same, and certify the result to the Postmaster General, 
which action thereon shall be final. 

The Postmaster General is authorized and directed to readjust the pay to 
companies operating railroads for the transportation and handling of the mails 
and furnishing facilities in connection therewith, not less frequently than once 
in each fiscal year, commencing with July first, nineteen hundred and twelve, at 
a rate of compensation per annum not exceeding the cost to the railroad com¬ 
panies of carrying the mails as ascertained by him, and six per centum of such 
cost: Provided , That when such ascertained cost and six per centum does not 
equal twenty-five dollars per mile per annum, he may, in his discretion, allow 
not exceeding such rate. 

Railroad companies whose railroads were constructed in whole or in part by 
a land grant made by Congress on the condition that the mails should be trans¬ 
ported over their roads at such price as Congress should by law direct, shall re¬ 
ceive not exceeding the cost to them of performing the service. 

Information shall be furnished and adjustments made as near as practicable 
by accounting systems or roads, and the cost and the compensation for the term 
shall be stated for all service covered by each system or road. The routes for a 
system or road may be stated for administrative purposes in such manner as the 
Postmaster General may determine. 

The Postmaster General may order new or additional service during a term 
for which an adjustment shall have been made or service authorized on any 
system or road, in any train operated by such system or road over any part of 
the trackage included in the adjustment or authorization, and without additional 
compensation therefor during such term. 

He may order service over new or additional trackage of an adjusted system 
or road during a term and state the amount performed for the remainder of such 
term on statistics obtained for the first thirty days of service. Payment therefor 
may be made at not exceeding the average rate per car-foot mile for the system 
or road ascertained at the regular adjustment. Entire discontinuance of service 
over trackage included in the adjustment or thereafter added shall be deducted 
for at the car-foot mile rate of adjustment or mile rate of authorization. In 
case the operation of service over trackage included in an adjustment or there¬ 
after added is undertaken by another company during the term, the same may 
be recognized by the Postmaster General, provided the companies in interest 
shall file with him their joint agreement as to the part of the compensation of 
the old operating company to be paid the new operating company; otherwise 
payment to the company first authorized shall be full payment for all service 
performed for the term. 

The Postmaster General may order service over trackage of a railroad com¬ 
pany not operating service under an adjustment or authorization after the reg¬ 
ular adjustment for the remainder of the term, and pay therefor at not exceed¬ 
ing forty-two dollars and seventy-five cents per mile of trackage per annum. 

Service over property owned or controlled by a terminal company shall be 
considered service of the roads or systems using such property and not that of 
the terminal company. 

Railroad companies carrying the mails shall furnish all necessary facilities 
for carjng for and handling them while in their custody. They shall furnish 


RAILWAY MAIL PAY. 


5 


all cars or parts of cars used in the transportation and distribution of the 
mails, and place them in stations before the departure of trains when required 
to do so. They shall provide side, terminal, and direct transfer service and all 
station and depot space and rooms for handling, distribution, and transfer of 
mails en route, and for offices and rooms for the employees of the postal service 
engaged in such transportation, when ordered by the Postmaster General. 

Every railroad company carrying the mails shall carry on any train it 
operates and without extra charge therefor the persons in charge of the mails, 
and when on duty and traveling to and from duty, and all duly accredited agents 
and others of the Post Office Department and the postal service, while traveling 
on official business, upon the exhibition of their credentials. 

All cars or parts of cars used for the Railway Alail Service shall be of such 
construction, style, length, and character, and furnished in such manner as shall 
be required by the Postmaster General, and shall be constructed, lifted up, 
maintained, heated, lighted, and cleaned by and at the expense of the railroad 
companies. No payment shall be made for service by any railway post-office 
car which is not sound in material and construction, and which is not equipped 
with sanitary drinking-water containers and toilet facilities, nor unless such car 
is regularly and thoroughly cleaned. No pay for service shall be allowed for 
the operation of any wooden railway post-office car unless constructed substan¬ 
tially in accordance with the most approved plans and specifications of the 
Post Office Department for such type of cars, nor for any wooden railway 
post-office car run in any train between adjoining steel or steel underframe 
cars, or between the engine and steel or steel underframe car adjoining. All 
additional cars accepted for this service shall be of steel or with steel under¬ 
frame if used in a train in which a majority of the cars are of steel or steel 
underframe. After the first of July, nineteen hundred and sixteen, the Post¬ 
master General shall not approve or allow to be used or pay for the use of any 
railway post-office car not constructed of steel or with steel underframe, if 
such car is used in a train in which a majority of the cars are of steel or of 
steel underframe construction. The Postmaster General shall make deductions 
from the pay of the railroad companies on the basis of the value of the service 
computed on the car-foot mile basis in all cases where the cars do not comply 
with the provisions of this Act. 

The space in cars devoted to the use of the mails, as ascertained during the 
period fixed by the Postmaster General for the rendition of information by the 
railroad companies, shall be taken as the basis for computing the car-foot 
miles devoted to the mail service for the purpose of readjustment, effective 
from the first of July next following: Provided, That no credit shall be given 
for space in cars devoted to the distribution of the mails unless such space 
shall be authorized by the Postmaster General or unless he shall determine 
that its use is made necessary by a specific authorization. 

If any railroad company shall fail or refuse to provide cars or apartments in 
cars for distribution purposes when required by the Postmaster General, or shall 
fail or refuse to contruct, fit up, maintain, heat, light, and clean such cars and 
provide such appliances for use in case of accident as may be required by the 
Postmaster General, it shall be fined such sum as shall, in the discretion of the 
Postmaster General, be deemed proper. 

The Postmaster General shall in all cases decide upon what trains and in 
what manner the mails shall be conveyed. Every railroad company carrying 
the mails shall carry on any train it operates all mailable matter directed to 
be carried thereon. If any railroad company shall fail or refuse to transport 
the mails when required by the Postmaster General upon any train or trains 
it operates, such company shall be fined such amount as may, in the discretion 
of the Postmaster General, be deemed proper. 

The Postmaster General may make deductions from the pay of railroad com¬ 
panies carrying the mails under the provisions of this act for reduction in serv¬ 
ice or frequency of service where, in his judgment, the importance of the 
facilities withdrawn or reduced requires it and impose fines upon them for de¬ 
linquencies. He may deduct the price of the value of the service in such cases 
where it is not performed, and not exceeding three times its value if the failure 
be occasioned by the fault of the railroad company. 

The Postmaster General is authorized to have such weights of mails and 
measurements of space taken and to collect such other information by sworn 
employees of the Post Office Department as he may deem necessary and to 
have such information stated and verified to him by such employees, under 
such instructions as he may consider just to the Post Office Department and 
the railroad companies, to assist in the ascertainment of the space used for 


6 


RAILWAY MAIL PAY. 


the transportation and the handling of the mails on railroads, and to employ 
such special clerical and other assistance as shall be necessary to carry out 
the provisions of this act, and to rent quarters in Washington, District of 
Columbia, if necessary, for the clerical force engaged thereon, and to pay for 
the same out of the appropriation for inland transportation by railroads. 

The provisions of this act shall apply to service operated by railroad compa¬ 
nies partly by railroad and partly by steamboats. 

The provisions of this act respecting the rate of compensation and the deter¬ 
mination thereof shall not apply to mails conveyed under special arrangement 
in freight trains, for which a rate not exceeding the usual and just freight rates 
may be paid, in accordance with the classifications and tariffs approved by the 
Interstate Commerce Commission. 

It shall be unlawful for any railroad company to refuse to carry the mails 
at the rates of compensation provided by law when and for the period required 
by the Postmaster General so to do, and for every such offense it shall be fined 
not exceeding $5,000. 

All laws or parts of laws inconsistent herewith are hereby repealed. 


VIEWS OF RAILROADS REQUESTED. 


The bill was referred to the Committee on Post Offices and Post 
Roads on the date of its introduction in the Senate, but owing to the 
fact that the Post Office appropriation bill was already burdened 
with many items of new legislation the committee deemed it unwise, 
as it was impracticable, to undertake to legislate upon a subject of 
such magnitude in the time intervening between the introduction of 
the bill and the near approach to the close of the second session of 
the Sixty-second Congress. It was such consideration as this that 
led to the authorization and appointment of the joint committee. 

Recognizing the importance and the magnitude of the task as¬ 
signed to the joint committee and desiring as much as possible to ex¬ 
pedite its work, I, after the adjournment of Congress and before 
leaving Washington, addressed a circular letter to the executive offi¬ 
cers of all railroads carrying the mails, 795 in number, the purpose 
being to secure an expression of opinion on the plan recommended 
by the Post Office Department and embodied in S. 7371. The letter 
reads as follows: 


Washington, September 11, 1912. 


My Dear Sir: I band you herewith a copy of Senate bill 7371, introduced 
by me by direction of the Senate Committee on Post Offices and Post Roads, 
embodying a plan recommended by the Post Office Department for determining 
the compensation to be paid to railroad companies for transportation of the 
mails. This general subject has been referred to a joint committee of Congress. 
The committee has not yet organized and probably will not do so for several 
weeks; but as a member of that committee and as chairman of the Senate Com¬ 
mittee on Post Offices and Post Roads, and under authority of Senate resolution 
56, I desire to secure immediately such information as may be available for 
submission to the committee at its first meeting. I will ask you, therefore, to 
answer the following questions: 

(1) Do you deem the present plan of compensation an equitable one as be¬ 
tween the Government and the railroads? If not, in what respects and as to 
what classes of railroads is it inequitable? 

(2) Is the underlying principle of the plan embodied in the inclosed bill a 
proper basis for compensation? If not, wherein is it improper, and why? 

(3) What, in your opinion, is a desirable plan for compensating railroad com¬ 
panies for transporting the mails? 

I desire an early reply to these inquiries relating to the general plan, and 
if you are not ready to do so now shall be glad to have you submit later a 
detailed discussion of this bill and of House Document No. 105, Sixty-second 
Congress, first session, with which, I assume, you are familiar. 

Yours, very truly, 


Jonathan Bourne, Jr., 

Chairman Senate Committee on Post Offices and Post Roads. 


RAILWAY MAIL PAY. 


7 


REPLY BY COMMITTEE ON RAILWAY MAIL PAY. 

In a letter dated October 3, Mr. Ralph Peters, acting chairman, 
committee on railway mail pay, representing 268 railroads operating 
over 214,275 miles of railroad, responded to the questions propounded 
in the circular letter referred to as follows: 

New York, October 3 , 1912. 

Hon. Jonathan P>ourne, Jr., 

Chairman Senate Committee on Post Offices and Post Roads, 

Washington, D. C. 

My Dear Sir : The committee on railway mail pay, representing 2G8 roads 
operating over 214,275 miles of railroad, has been investigating the subject of 
mail compensation for about three years, or since the Post Office Department, 
in 1909, sent out a series of questions regarding the space furnished for mails 
in passenger trains, and the cost to railroad companies of the service which 
they perform for the Government in the carriage of the mails. Therefore the 
committee has thought it would be of interest to you to receive from it an 
answer to the questions propounded by your letter of September 11, 1912, 
addressed to the officers of railroads throughout the country. - 

A response to House Document No. 105 is now in course of preparation, and 
will be submitted at an early date. In the meantime, our committee desires to 
submit the following replies to your inquiries: 

Question 1. Do you deem the present plan of compensation an equitable one 
as between the Government and the railroads? If not, in what respects and as 
to what classes of railroads is it inequitable? 

Answer. The existing law has never worked to the disadvantage of the Gov¬ 
ernment, but has failed to do justice to the railways, by reason of infrequent 
weighing; absence of pay for nearly 40 per cent of the space occupied as travel¬ 
ing post offices; the performance, without pay, of side and terminal messenger 
service; and the unjustifiable reduction in pay by the act of Congress dated 
March 2. 1907. supplemented by Order No. 412 of the Postmaster General, 
changing the divisor. 

The present law is based upon correct principles, but should be so amended 
as to provide— 

(a) For the repeal of the act of March 2, 1907. 

Notwithstanding the large increase in every other item connected with the 
administration of the Post Office Department, the railroads’ pay has been 
singled out as the one element in these operations for concentration of econo¬ 
mies. This, too, in the face of the fact that the operating expenses of the rail¬ 
roads have been greatly augmented by the requirements of the law with refer¬ 
ence to steel equipment, and a general increase in cost characteristic of all 
business operations. 

(&) For annual weighings, and a definite and just method for ascertaining 
daily average weights. 

Under the quadrennial weighing, all increased weight of mail during the next 
succeeding four years is carried by the railroads without any compensation 
whatever, which is manifestly unfair. 

The railroads must provide car space and facilities for the maximum weight 
offered at any time, yet they are paid only for the average weight carried. The 
Postmaster General’s order covering the divisor has unfairly reduced this 
average. * 

This provision is essentially necessary in view of the bill establishing the 
parcel post, effective January 1, 1913, which will result in taking from the 
express service traffic for which the railroad companies now receive compensa¬ 
tion and transferring it to the mail service; the bill referred to containing no 
provision for payment to the railroad companies for the increased tonnage to be 
handled in mail cars, although such provision was made for the star routes and 
the city wagon service. 

(c) For pay for apartment cars on some basis that will compensate for the 
service. 

That the Postmaster General has himself recognized the justice of such a 
change is indicated in the following quotation from page 3 of House Document 
No. 105: “* * * an additional amount may be allowed for railway post- 

office cars when the space for distribution purposes occupies 40 feet or more of 
the car length. No additional compensation is allowed for space for distribution 


8 


RAILWAY MAIL PAY. 


purposes occupying less than 40 feet of the car length. This distinction is a 
purely arbitrary one and without any logical reason for its existence.” 

(d) For a fair allowance to the railroads for the side and terminal messenger 
service which they perform for the Post Office Department, according to the 
value of this service to the Post Office Department. 

The necessity for this is also emphasized by the establishment of the parcel 
post, which will undoubtedly add greatly to the expense of the service. 

(e) That all rates of pay should be definite and not subject to the discretion 
of the officers of the Post Office Department. 

Other inequities exist under the present law, but are due to the administra¬ 
tive methods rather than to the law itself. 

Question 2. Is the underlying principle of the plan embodied in the inclosed 
bill a proper basis for compensation? If not, wherein is it improper, and why? 

Answer. The underlying principle of the plan embodied in Senate bill 7371 is 
not correct. Any plan of compensation based upon operating cost and taxes, 
plus 6 per cent for profit, is fundamentally wrong, because it makes no allow¬ 
ance for return upon the property employed. 

Furthermore, such plan is not correct because it involves paying the highest 
rates to the railroad that by reason of physical disabilities or inefficient methods 
is most expensively operated and the lowest rates to the railroad whose opera¬ 
tions are most efficient and whose service is most satisfactory and valuable to 
the Post Office Department. Under the plan proposed a railroad would be 
penalized for all the capital expenditures made by it for the purpose of decreas¬ 
ing its operating cost, because the more it decreased its operating cost the more 
it would decrease its mail pay, although by making this improvement in operat¬ 
ing cost it would have incurred an additional capital charge upon which it 
would have to pay dividends or interest. 

The ascertainment of the cost to a railroad of conducting the mail service 
is necessarily very largely a matter of judgment and opinion, because a large 
proportion of the total operating expenses are expenses common to the freight 
and passenger traffic and can only be approximately apportioned, and there are 
various formulas existing for such apportionment. It would not be right or 
proper to intrust to the Post Office Department the discretion of selecting the 
formulas by which to ascertain these costs because the Post Office Department 
has an obvious interest at stake, its object always being to reduce the railroad 
pay to a minimum. 

The estimated cost of a specific service is not a proper basis for fixing rates 
for transportation of any commodity. The railroads are entitled to receive a 
full and fair return for the value of the service performed, and the ascertain¬ 
ment of cost of such service is principally of value as a protection against the 
establishment of confiscatory rates. 

Question 3. What, in your opinion, is a desirable plan for compensating rail¬ 
road companies for transporting the mails? 

Answer. The existing law has been in effect for nearly 40 years and those who 
have worked under it are more or less familiar with its operations. If it were 
amended to correct serious inequities, as suggested in the answer to question 1, 
and fairly and impartially administered by the Post Office Department, it 
would be preferable to any untried or theoretical plan that could be proposed. 

Very respectfully, yours, 


Committee on Railway Mail Pay, 
By Ralph Peters, Acting Chairman. 


To present more fully the points of objection raised in its letter of 
October 3, the committee on railway mail pay has submitted a 
pamphlet entitled “ Mail Carying Railways Underpaid,” which is 
in the language following, to wit: 


Mail Carrying Railways Underpaid. 


I. SCOPE of this pamphlet. 

The committee on railway mail pay, representing railways whose lines include 
92 per cent of the aggregate length of all railway mail routes in the United 
States, believes that the payments to the railways for the services and facilities 
furnished by them to the Post Office Department are, and for a long time have 
been, unjustly low. This pamphlet contains a concise statement of the facts 


RAILWAY MAIL PAY. 


9 


which prove that this belief is warranted and. incidentally, a refutation of the 
estimates made by the Postmaster General and reported to the Congress (H. Doc. 
No. 105, 02d Cong., 1st sess.), which led him to conclude that the basis of pay¬ 
ment could now properly be changed so as to accomplish a present reduction of 
about 20 per cent. It will he shown that although the insufficient data and the 
erroneous methods employed by the Postmaster General resulted in his making 
estimates of cost to the railways that are far below the real cost, his own figures 
and calculations, when properly analyzed and supplemented, demonstrate that 
the mail service has not been fairly remunerative to the railways. 

Before proceeding to this demonstration it should, however, he noted that— 


II. RAILWAY MAIL PAY IS ABOUT TO BE FORCED STILL FURTHER BELOW THE LEVEL 
OF JUST COMPENSATION, UNLESS PAYMENTS ARE PROMPTLY READJUSTED, ON 
ACCOUNT OF THE ADDITIONAL VOLUME OF MAIL THAT WILL RESULT FROM THE 
INAUGURATION, ON JANUARY 1, 1013, OF THE PARCEL POST. 


Congress has provided for a vast and incalculable extension of mail traffic by 
creating a “ parcel post,” to be inaugurated on January 1, 1913, which, by 
opening the mails to many articles not previously accepted at the post offices 
and by materially reducing the rates on mailed merchandise, is exacted enor¬ 
mously to increase the volume of the shipments which it covers. The Govern¬ 
ment seems to have assumed that under existing contracts, which were made 
before the meaning of the word “ mail ” was thus extended, the railways can be 
compelled, until these contracts expire, to carry this great additional volume of 
mail traffic without any compensation whatever. If the former practice of the 
Post Office Department is followed, no new contracts will be made until after 
the next quadrennial weighings in each of the four weighing sections, so that 
the position of the Government amounts to an assertion that the whole added 
volume of the parcel-post mails will have to be carried without any compensa¬ 
tion by the railways of New England for four years and six months (these, 
railways are in the first weighing section, but the weighing for the adjustment 
to be made on July 1, 1913, has begun and will he completed before the parcel 
post is inaugurated), by those of the second weighing section for three years 
and six months, by those of the third weighing section for two years and six 
months, by those of the fourth weighing section for one year and six months, 
and by those of the first weighing section not located in New England for six 
months. No presentation of the injustice of the mail pay received in former 
years suggests even the approximate extent of the losses which the railways 
will thus incur in the next four and one-half years unless readjustments are 
promptly made on account of the parcel post. 

III. THE POSTMASTER GENERAL’S ERRONEOUS ASSERTION THAT THE RAILWAYS WERE 
OVERPAID “ABOUT $0,000,000 ” IN THE YEAR 1909 RESTS PRIMARILY UPON HIS 
ADOPTING AN UNPRECEDENTED THEORY WHICH ALLOWS NOTHING FOR A RETURN 
UPON THE CAPITAL INVESTED IN RAILWAY PROPERTY. 


The Postmaster General assumed that the railways would he properly com¬ 
pensated if they received a sum equal to the operating expenses and taxes 
attributable to the carriage of the mails plus 6 per cent of the sum of those ex¬ 
penses and taxes. The calculation by which he obtained the sum which he 
assumed would have been proper compensation for the single month covered by 
his investigation was as follows: 


His estimate of operating expenses and taxes on account of mail 

service (Doc. No. 105, p. 280) for 1 month- 

6 per cent of above- 


$2, GIG, 503. 75 
160, 590. 22 


Total, assumed to represent just compensation for 1 month- 2. 837, 093. 97 

The railways having been paid, for the month selected, $770,679.16 in excess 
of the sum resulting from the above calculation, the Postmaster General as¬ 
sumed that this excess over expenses and taxes plus 6 per cent constituted ex¬ 
cessive profit for that month. He multiplied this assumed excess by 12 to get 
his estimate of annual excess and stated the result, in round figures, as “about 

$ 9 , 000 , 000 .” . 

The mere statement of this method discloses the fact that it makes no allow¬ 
ance for any return upon the fair value of the railway property employed in 
the service of the public. This omission is, of itself, sufficient wholly to destroy 





10 


RAILWAY MAIL PAY. 


the Postmaster General’s conclusion. Everyone recognizes that a railway is 
entitled to at least a reasonable return upon the value of its property devoted 
to the public service. The Postmaster General ignored this universally accepted 
principle and adopted a theory which, if applied to the general business of the 
companies, would render substantially every mile of railway in the United 
States immediately and hopelessly bankrupt. The recently published report of 
the Interstate Commerce Commission on the railway statistics of the year that 
ended with June 30, 1910, contains data by which this statement is easily 
demonstrated, as follows: 

Operating expenses of all United States railways for the year_$1,822,030,433 


Taxes of all United States railways for the year_ 103, 795, 701 

Total_ 1, 920, 426,134 

6 per cent of above total_ 115. 585, 568 

Total gross receipts permitted by Postmaster General’s 

plan___ 2, 042, Oil, 702 


But if this plan had been in force the railways would have had, for interest 
on mortgage bonds, a reasonable surplus as a margin of safety, dividends on 
stocks, unprofitable but necessary permanent improvements, 1 rents of leased, 
properties, etc., only the 6 per cent, or $115,585,568. This figure may be com¬ 
pared with the following among others: 

Interest obligations (on funded debt only) of all United States 

railways for the same year_’_$370. 092, 222 

Rentals of leased properties all United States railways for the 
same year_ 133, 881. 409 

Plainly, the Postmaster General’s proposal is equivalent to an assertion that 
the railways would make a fair profit if they were enabled to collect the sum 
of $115,585,568 in addition to their operating expenses and taxes, but the figures 
given by the Interstate Commerce Commission show that this would be less 
than one-third of the sum necessary to meet interest charges, which must be 
paid in order to prevent foreclosures of mortgages, and, if bond interest could 
be ignored, is much less than the rentals that must be paid if the existing sys¬ 
tems are not to be broken up. And, of course, it would allow nothing what¬ 
ever for legitimate demands upon income for dividends, permanent improve¬ 
ments, or surplus. 

It is unnecessary to dwell upon the consequences of such a theory of “ com¬ 
pensation ” to railroad credit and to the public interest in efficient transporta¬ 
tion service, to say nothing of the consequences to owners of railroad stock and 
bonds. Such a theory is not a theory of compensation—it is a theory of oppres¬ 
sion and of destruction. 

The fact that the Postmaster General has found it necessary to justify his 
attack upon the present basis of railway mail pay by a theory so unprecedented 
and so unwarranted in principle and in law raises a strong presumption against 
all his opinions and conclusions upon this subject. 

IV. THE MAIL SERVICE SUPPLIED BY THE RAILWAYS COSTS THEM MORE IN OPERATING 
EXPENSES AND TAXES THAN THEY ARE PAID FOR IT, AND LEAVES NOTHING FOR 
RETURN ON THE PROPERTY. 

It can not be too strongly emphasized that the railway mail pay at present is 
insufficient to pay even its proper share of operating cost and taxes and does 
not produce any leturn upon the property. This will be demonstrated by any 
fair inquiry, as will now be shown. Reports submitted to the Postmaster 
General by railways operating 2,411 mail routes, with a total length of 178,710 


1 The necessity for providing, out of income, for some kinds of improvements is com¬ 
monly admitted. The public constantly demands greater comfort and convenience, which 
can be supplied only by improvements in property and equipment that bring in no addi¬ 
tional income. A present example in the mail service itself is the great expense which 
the railways are now undergoing in substituting steel mail ears for those formerly in 
use. The old cars, which thus become a total loss were fully up to the most advanced 
standards of construction when built, and they could continue for a long time to serve 
the purposes of the service except for the public demand for stronger cars. 














RAILWAY MAIL PAY. 


11 


miles, showed that their gross receipts, per car-foot mile , 1 from services rendered 
on passenger trains during November, 1909, were as follows: 

Mills. 


From mail_ 3 , 23 

From other services_ 4 . 35 


Thus, it appears that the space on passenger trains required for the mails is 
proportionately less than three-quarters as productive as that devoted to pas¬ 
sengers, express, milk, excess baggage, etc. As it is the general belief of railway 
managers, whose conclusion in this respect has rarely if ever been challenged, 
that the passenger-train services, as a whole, do not produce revenues sufficient 
to meet their fair proportion of the operating costs and the necessary return 
upon invstment, and therefore are not reasonably compensatory, it is evident 
that the mail service, the pay for which is more than 25 per cent below the 
average for the other services rendered on the same trains, must bring in much 
less than reasonable compensation. Certainly railroad revenues as a whole 
could not be reduced 25 per cent without destroying all return upon the property. 
If so, it must be true that there can be no compensation in a rate of mail pay 
that is 25 per cent less than the rate of pay for passenger raffle which, as above 
shown, is relatively unprofitable. 

No merely statistical comparison can, however, reveal the whole story, for the 
railways are required to furnish many incidental facilities and to perform many 
additional services for the Post Office Department, which render the mail serv¬ 
ice exceptionally arduous and costly. These extra services include calling for 
and delivering mails at a large proportion of the post offices located at railway 
towns; supplying rooms, with light, heat, and water in railway stations for the 
use of the mail clerks; placing cars, duly lighted and heated, on station tracks 
for advance distribution, often many hours before the departure of trains; 
carrying officers and agents of the Post Office Department as passengers but 
without compensation to the extent of more than 50,000,000 passenger miles 
annually (this being, of course, in addition to the railway mail clerks on 
duty), etc. Extracts from the Postal Laws and Regulations defining and de¬ 
manding these services are given in Appendix A. No one can examine this 
appendix and not be convinced that the mail service is. the most exacting 
among all those rendered by American railways. 

The fairness of railway mail pay can also be tested by apportioning operating 
expenses between passenger and freight traffic, and then making a secondary 
apportionment of the passenger expenses between mail and other kinds of 
traffic carried on passenger trains. This method involves charging directly to 
each kind of traffic all expenses pertaining exclusively thereto, and the appor¬ 
tionment, on some fair basis, of those expenses which are common to more 
than one kind of traffic. 

In accordance with the request of the Postmaster General, the railways 
estimated the cost of conducting the mail service in the manner just explained 
and reported the results to the Postmaster General. After first charging to 
each service the expenses wholly due to it they apportioned the common ex¬ 
penses between the passenger and freight services, following (with incon¬ 
sequential exceptions) the method most generally employed for that purpose, 
namely the apportionment of these expenses in the proportions of the revenue 
train mileage of each service. Having estimated, in this way, the operating 
expenses attributable to passenger trains, the railways assigned to the mails the 
portion of this aggregate indicated by the proportion of the total passenger 
train space required for the mails. Using this method, 186 railways, operating 
2,370 mail routes, with a total length of 176,716 miles, ascertained and reported 
that for November, 1909, the operating expenses (not including taxes) for 
conducting the mail service were $4,009,184. The Postmaster General states 
(Doc. No. 105, p. 281) that all the lailways represented in the foregoing, and 
enough others to increase the mileage represented to 194,978 miles, were paid for 
the same month only $3,607,773.13. It thus appears that the pay was far below 
the operating expenses, without making any allowance for taxes or for a return 
upon the fair value of the property employed. 

While different methods are in use for ascertaining the cost of passenger- 
train service and the results produced by such methods may show considerable 


iA car-foot mile is a unit equal to moving 1 foot in car length (regardless of width 
or height) 1 mile. Thus to move a car 60 feet long 1 mile results in 60 car-foot miles ; 
to move the same car 3 miles results in 180 car-foot miles, etc. 






12 


RAILWAY MAIL PAY, 


variation, yet tlie mail pay is so far below reasonable compensation, from the 
standpoint of the cost of the service and a return upon the value of the prop 
erty, that no method can be reasonably urged which would not demonstrate 
the noncompensatory character of the present mail pay. This is illustrated by 
the method which the Postmaster General himself employed, as the character 
of that method is such that it necessarily produces the very lowest estimate of 


cost for the passenger-train service. 

The Postmaster General by his method of apportionment arrived 

at a cost of__$2, 676, 503. 75 

But this must be increased, as will be shown below, on account 

of his erroneous apportionment of car space (p. 10), by_ 800,802.00 

And also on account of his refusal to assign expenses directly 

incurred in the mail service (p. 12)_ 1 401,126. 00 

Total, according to the Postmaster General’s method of appor¬ 
tioning costs between passenger and freight traffic_ 3, 87S, 431. 75 

Thus even the Postmaster General’s method of apportioning costs between 


freight and passenger traffic produces an operating cost in excess of the total 
pay received by the railways, leaving nothing whatever for return upon the 
fair value of the property or necessary but nonincome-producing improvements. 

There is no allowance in any of these estimates of cost for the large volume 
of free transportation supplied to officers and agents of the Post Office Depart¬ 
ment when not in charge of mail, although this amounts to over 50,000,000 
passenger miles annually, and, at the low average rate of 2 cents per mile, 
would cost the Post Office Department more than $1,000,000 per year. 

Moreover, as will presently be shown (pp. 13-14) all the figures here dis¬ 
cussed are for the month of November, a month which, because of the abnor¬ 
mally low ratio of passenger traffic to freight traffic, substantially understates 
the cost of the passenger-train services, when figures derived from it are 
applied to an entire year. 

It thus becomes evident that any inquiry which takes into consideration the 
necessary elements of the situation will demonstrate that railway-mail pay is 
too low. It is only by ignoring essential elements of the service and of ex¬ 
pense and the fundamental element of a return on the value of the property 
that any argument to the contrary can be constructed. 

Thus the mail traffic does not pay its operating cost. That traffic is a sub¬ 
stantial percentage of the total public service performed by the railroads. It 
should contribute a substantial proportion to the taxes which the railroads 
have to pay and to the return on railroad property which its owners are en¬ 
titled to receive. Clearly no fair method can be devised which will fail to 
show that the existing mail pay is far below a fairly compensatory basis. Cer¬ 
tainly this condition ought not to be intensified by adding the injustice of still 
further reductions. On the contrary, the unjust reductions of recent years 
should be corrected for the future, and the railroads should be relieved from 
the strikingly unjust methods by which they are at present deprived of any¬ 
thing approaching fair compensation. 

V. THE rOSTMASTER GENERAL’S APPORTIONMENT OF SPACE BETWEEN THE MAIL 
SERVICE AND THE OTHER SERVICES RENDERED ON PASSENGER TRAINS DID NOT 
ALLOW TO THE MAILS THE SPACE WHICH THEY ACTUALLY REQUIRE AND USE, AND 
THIS HAD THE RESULT OF UNDULY REDUCING HIS ESTIMATES OF THE COST TO THE 
RAILWAYS OF THE MAIL SERVICE. 

Detailed reference will now be made to the methods and controlling effect of 
the Postmaster General’s apportionment of passenger-train space between the 
mails and the other services rendered on passenger trains. Such an appor¬ 
tionment was a necessary step in the calculations reported in Document No. 
105. Having obtained certain estimates of the cost of the passenger-train serv¬ 
ices. considered together by methods producing the lowest results, the next 
step shown in Document No. 105 was to apportion a part of this cost to the 
mail service. The accepted method for such an apportionment is to distribute 
the total cost in proportion to the train space required by each of the respective 
services. The Postmaster General obtained from the railways statements which 


1 There may be some duplication in this item, but to eliminate it would require an 
elaborate computation which, in view of the broad margin of expenses over receipts, is 
wholly superfluous. Whatever duplication exists must be small in comparison with 
this margin. 







RAILWAY MAIL PAY. 


13 


be might have used m applying this method, and these statements showed that 
,7 pr cent of the total space in passenger trains was required by the mails; 
bllt instead of using the data showing this fact, he substituted figures of his 
own which reduced the space credited to the mail service to 7.16 per cent of 
1 le total, the total of passenger-train costs which the Postmaster General 
estimated should he apportioned among passengers, express, and mail, on the 
basis of space occupied, was $37,074,172. 1 He therefore assigned to the mail 
service 7.16 per cent, of the last-named sum, or $2,654,510.69. If, however, he 
had used the proportion of space, 9.32 per cent, resulting from the reports he 
1 ad obtained from the railways, the amount apportioned as cost of the mail 
soi \ ice for the month would have been $800,802 greater. Multiplying this by 
12 gives an increase in the estimated annual cost of over $9,600,000. 

Thus the Postmaster General arrived at his declaration that the railways 
were getting an excess profit of $9,000,000 by means of two fundamental errors, 
omitting for the present reference to any other errors. He understated the 
annual mail expenses and taxes of the railways by at least $9,600,000, and he 
ignored entirely the necessary return on the value of railroad property. 

This examination of his methods shows that the determination of space was 
of primary and controlling importance and that the changes in space allotment 
have destroyed the value of his deductions. These changes were due to his 
refusal to assign to the mail service the working space and temporarily un¬ 
occupied space on trains, which were necessary to the mail service, and to his 
actually assigning much of this space to the passenger service rendered on the 
same trains. 

It is scarcely necessary to note that all kinds of traffic require “ working 
space ” in addition to the space actually occupied by the traffic itself, and that 
this is especially true of the mail traffic, or that where there is a preponderating 
movement of a certain traffic in one direction there must be some empty space 
on account of that traffic, sometimes called “ dead ” space, in trains moving in 
the direction of lighter traffic. Thus passenger cars must have aisles, vestibules, 
and platforms, and postal cars must have a great deal of space in which to 
sort the mails while, for mail carried in baggage cars, there must be space in 
which to reach the pouches and to receive and deliver them through the doors. 
A through train must also have the full capacity required for the maximum 
traffic of any kind likely to seek accommodation on any part of its journey, 
although during much of each trip the actual traffic may be considerably below 
this limit. The Postmaster General, however, refused to credit the mail service 
with much of the space thus required by the department, although his figures 
for the other passenger-train services allowed fully for all such space required 
by them. In fact, in many cases such space actually required by the mails and 
so reported by the railways, was taken from the total mail space and, without 
reason, assigned to the passenger service. These modifications of the data 
correctly reported, not susceptible of justification upon any sound transportation 
principle, were carried so far that the tabulations of the Post Office Depart¬ 
ment, which are stated for railway mail routes having a total length of 
194,977.55 miles 2 show only 926,164,459 “ car-foot miles ” made in the mail 
service, although certain railways, included therein and having railway mail 
routes aggregating only 178,709.96 miles, had correctly reported mail space 
equivalent to 1,153,110,245 “car-foot miles.” Thus, although the department’s 
figures cover 8.3 per cent more mileage, its reductions of space resulted in 
assigning to this greater mileage about one-quarter (24.5 per cent) less mail 
space. At the same time the department actually increased the space assigned 
to the other passenger-train services, its figures showing 12,014,065,506 car-foot 
miles in these services for 194,977.55 miles of mail routes, which must be com¬ 
pared with 11,222,478,739 car-foot miles reported by the railways for 178,709.96 
mail-route miles. 

This treatment of the controlling figures as to space, supplementing the other 
errors of method and omissions of fact, which have been or will be cited, was 
amply sufficient to turn a real loss into an apparent profit. 


1 This is the sum which was apportioned by the Postmaster General on the basis of 
train space occupied. He estimated $40,121,294.83 (Doc. No. 105, p. 280) as the total 
^Derating expenses and taxes of the passenger-train services for the month. Of this 
total, $21,993.06 was charged directly to the mails and $3,025,129.77 directly to the 
other passenger-train services, leaving the sum stated in the text to be apportioned on 
the space basis. 

2 Doc. No. 105, p. 53. 





14 


RAILWAY MAIL PAY. 


VI. THE POSTMASTER GENERAL IGNORED DATA WHICH HE HAD OBTAINED SHOWING 
EXPENDITURES ON ACCOUNT OF THE MAILS LARGELY IN EXCESS OF THE DIRECT 
EXPENSES FOR THAT SERVICE WHICH HE REPORTED. 


As a part of the investigation reported in Document No. 105 the Postmaster 
General obtained from the railways statements showing the amounts expended 
by them for the station and terminal services required by his department and 
the amount of free transportation furnished on his requisition for officers and 
agents of the postal service when not in charge of mail. These data were not 
used (Doc. No. 105, p. 6), and, as no adequate allowance was made in any other 
way for these expenses, the omission unjustly reduced the estimates of the cost 
to the railways of their postal service. The Postmaster General’s explanation 
of this omission implies that it was partially offset by the assignment as cost of 
mail service of its proportion, on the space basis, of all the station and terminal 
expenses of the passenger-train services, but these special mail expenses are 
disproportionately heavy and the amount so assigned was far too low. The 
expenses for station and terminal services especially incurred for the mails 
during November, 1909, and reported to the Postmaster General for 92 per 
cent of the mileage covered by Document No. 105, aggregated $401,136, as 
follows : 


Amount of wages paid to messengers and porters employed ex¬ 
clusively in handling mails___$79, 980. 84 

Portion properly chargeable to mail service, prorated on basis of 
actual time employed, of wages paid to station employees a part 

of whose time is employed in handling mails__ 198, 927. 01 

Amount expended for maintenance of horses and wagons and for 

ferriage, etc., in connection with mail service_ 5, 640. 98 

Rental value, plus average monthly cost of light and heat, of room 

or rooms set apart for the exclusive use of the mail service_ 37, 258. 93 

Rental value of tracks occupied daily for advance distribution of 

the mail_ 47, 029.12 

Average monthly cost of light and heat for postal cars placed daily 

for advance distribution of mail_ 18. 400. 57 

Interest at the legal rate upon the value of cranes, catchers, and 
trucks required for mail service_ 3, 895. 36 


Total___ 1 401,126.00 

All the foregoing data were reported to the Postmaster General in response 
to his request, but he made no use of these items, an omission manifestly to the 
serious disadvantage of the railways and having the effect of unduly reducing 
his estimates of the cost of the mail service. 

Similarly, the Postmaster General omitted to use the data he had obtained 
from the railways showing the volume of free-passenger transportation, already 
referred to, supplied to the officers and agents of the Post Office Department, 
and his estimates contain no recognition of the cost of this service, although its 
extent should be a matter of record in the department, as it is furnished only 
on its requisition. The space in passenger coaches occupied by these repre¬ 
sentatives of the Post Office Department, traveling free, was not assigned to 
the mail service, but was treated as passenger space. 


VII. THE MONTH OF NOVEMBER IS NOT A FAIR AVERAGE MONTH IN ANY RAILWAY 
YEAR OR ONE THAT IS TYPICAL OF A YEAR’S BUSINESS AND ITS USE AS THE SOLE 
BASIS OF THE POSTMASTER GENERAL’S CALCULATIONS WAS SO UNFAVORABLE TO 
THE RAILWAYS AS TO DEPRIVE THE RESULTS OF ANY VALUE EVEN IF IN ALL OTHER 
RESPECTS HIS METHODS WERE BEYOND CRITICISM. 

All the Postmaster General’s calculations, reported in Document No. 105, 
and by him relied upon therein, and elsewhere, to substantiate his attack upon 
existing railway mail pay, depend solely upon data for the single month of 
November, in the year 1909. It is obvious, therefore, that the validity of his 
conclusions, if all the rest of his processes were accurate and his deductions 
otherwise sound, would depend upon whether November is sufficiently typical 
of the railway year to be safely used as the sole basis for conclusions applicable 


1 This total includes $9,993.19 reported by four companies which gave totals for these 
items, but did not report the items separately. 












RAILWAY MAIL PAY. 


15 


to a whole year. The truth is, however, that November is not a typical or 
average month and that all of its deviations from tlie averages of the year 
are such as greatly to favor the result which the Postmaster General was 
seeking. 

It may well be doubted whether the railway year contains any month that 
can properly be regarded as typical of the whole period, but if it does, the 
month of November, with 4 Sundays, 2 holidays, and only 24 working days, 
is certainly not such a month. The Interstate Commerce Commission publishel 
the monthly aggregates of railway receipts and these official data conclusively 
prove that November, 1909, was the one month for which the data were most 
strongly favorable to finding, by the Postmaster General’s method, an abnor¬ 
mally low apparent cost for the passenger train services and, consequently, 
for the mail service. 

It is a month in which substantially winter conditions prevail in a large 
part of the country and, on this account, one during which much of the ordinary 
work of maintenance of way and structures must be suspended. Such work 
occasions a large fraction of the yearly expenses of all railways and these ex¬ 
penses pertain in a relatively large proportion to the passenger services becaure 
the higher speed of passenger trains results in greater relative wear and tear upon 
roadbed and structures than that caused by the slower trains of the freight 
service and the requirements of safety to passengers carried at high speed 
impose more costly standards of maintenance than would otherwise be neces¬ 
sary. Consequently a month in which these maintenance expenses are neces¬ 
sarily below the yearly average can not typify the full annual cost of the 
passenger train services. Figures showing the facts are contained in Appendix B. 

It is, of course, understood that the respective expenses of the passenger and 
freight services must move upward and downward with the fluctuations in the 
volume of each sort of traffic. No month can furnish a reliable basis for esti¬ 
mating the proportion of the total expenses that is caused by the passenger 
service unless during that month the volume of passenger traffic bears a normal 
relation to the volume of freight traffic. But in November, 1909, as will ap¬ 
pear from official figures for each month in the year contained in Appendix- C, 
passenger traffic, as measured by receipts therefrom, was much below the 
average month of the year, while freight traffic was far above the average. 
The November receipts from passengers amounted to only 21.5 per cent of 
total receipts, the lowest relation shown for any month in the year. Of course, 
under these conditions passenger expenses were curtailed and freight expenses 
relatively enhanced. Certainly the use of data resulting from these abnormal 
relations could not possibly produce results fairly typical of a normal period— 
that is, of a whole year. The results so obtained must have diminished the 
apparent cost of the passenger-train services below the true cost by just as 
much as the figures for November were below the average figures of the year. 

These considerations fully establish the truth that, if every other feature of 
Document No. 105 were absolutely beyond criticism, the fact that it rests 
wholly upon estimates based upon data for the single month of November 
would render its conclusions illusory, misleading, and seriously prejudicial to 
the railways. 

VIII. A COMMISSION OF SENATORS AND MEMBERS OF CONGRESS WHICH, BETWEEN 

1898 AND 1901, MOST FULLY AND CAREFULLY INVESTIGATED THE SUBJECT ASCER¬ 
TAINED AND DECLARED THAT RAILWAY MAIL PAY WAS NOT THEN EXCESSIVE; 

SINCE THEN THERE HAVE BEEN MANY AND EXTENSIVE REDUCTIONS IN PAY. AC¬ 
COMPANIED BY SUBSTANTIAL INCREASES IN THE COST AND VALUE OF THE SERVICES 

RENDERED BY THE RAILWAYS. 

• 

The Congressional Joint Commission to Investigate the Postal Service, which 
reported on January 14, 1901, is authority for the fact that, at that time, rail¬ 
way-mail pay was not excessive. Senator William B. Allison, of Iowa; Senator 
Edward S. Wolcott, of Colorado; Senator Thomas S. Martin, of Virginia; Rep¬ 
resentative Eugene F. Loud, of California; Representative W. II. Moody, of 
Massachusetts; and Representative T. C. Catchings, of Mississippi, six of the 
eight members of the commission, then united in the following; 

“ Upon a careful consideration of all the evidence and the statements and 
arguments submitted, and in view of all the services rendered by the rail¬ 
ways, we are of the opinion that ‘ the prices now paid to the railroad compa¬ 
nies for the transportation of the mails’ are not excessive, and recommend 
that no reduction thereof be made at this time.” (S. Doc. No. S9, pp. 19, 22, 25, 
29, 52d Cong., 2d sess.) 


16 


RAILWAY MAIL PAY. 


Since the commission reported, the volume of the American mails, the revenue 
of the American postal service and its demands upon the railways for services 
and facilities have greatly increased. The costs of supplying railway trans¬ 
portation have also greatly increased. The necessary cost of railway property 
per unit of service has increased, and in consequence the amount required as 
a reasonable return thereon, on account of higher wages and prices, the higher 
standards of service demanded and the higher value of the real estate required 
for extended and necessary terminal plants. Operating expenses have grown by 
reason of repeated advances in rates of wages paid to employees of every grade 
and increased prices of materials and supplies. Taxes have increased with 
the rapidly augmenting exactions of State and local governments and the impo¬ 
sition of an entirely new Federal corporation tax. 1 Yet during this period of 
rapidly advancing railway expenses, and in spite of the fact that at its com¬ 
mencement the railway mail pay was not excessive, the rates of payment for 
railway mail services have been subjected to repeated and drastic decreases 
.accomplished both by legislative action and by administrative orders. These 
reductions have so much more than offset the rather doubtful advantages which 
the railways might be assumed to have obtained from the increased volume 
of mail traffic that in 1912 they find their mail service more unprofitable than 
ever before. The following table shows the facts: 


Fiscal year. 

Total rail¬ 
way mail 

pay. 

Average 
railway 
mail pay 
per $100 of 
postal 
receipts 

1901. 

$38,158,969 
43,971,848 

$34.18 

1904. 

30.62 

1907. 

49' 758', 071 
49,405,311 
50,583,123 

27.10 

1910. 

22.04 

1911. 

21.26 



The foregoing shows that the Post Office Department expended for railway 
transportation, in 1901, $34.18 in order to earn $100 in gross, and that by 1911 
this expenditure had been reduced 37.8 per cent to $21,26. 

This notable reduction was the consequence (first) of the operation of the 
law fixing mail pay under which the average payment per unit of service 
decreases as the volume of mail increases; (second) of the acts of Congress 
of March 2. 1907, and May 12, 1910; and (third) of administrative changes 
effected by the Post Office Department which, without decreasing the services 
required of the railways or enabling those services to be rendered at any lower 
cost, greatly reduced the payment therefor. Chief among these administrative 
changes was the Postmaster General’s order known as the “divisor” order 
(No. 412 of June 7, 1907, superseding Order No. 1G5 of Mar. 2, 1907), radi¬ 
cally lowering the basis for calculating the annual payments for transportation. 
No official estimate of the reduction in the aggregate annual payment produced 
by the operation of the law fixing the scheme of payment has been made, but 
from time to time the department has published estimates of the reductions 
otherwise effected. None of these estimates is now up to date, and to make 
them comparable with the present volume of mail substantial increases would 
be necessary, but they are given below as representing an amount substantially 
less than the lowest possible statement of the total present annual reduction. 


Amount of 

Cause of reduction: annual reduction. 

Natural operation of the law_.•_ No estimate. 

Acts of Mar. 2, 1907, and May 12. 1910_$2, 723,658. 90 

Withdrawal of pay for special facilities_ 167, 005. 00 

Postmaster General’s divisor order_ 4,941,940.34 

Other administrative changes_ 699, 544. 51 


Total (with no allowance for the first item above)_ 8,532,148.75 


1 Data indicating some of the increases in wages and taxes are given in Appendixes 
D and E. 























RAILWAY MAIL PAY. 


17 


No one will contend for a moment that there has been any net reduction in 
the cost of supplying railway mail services and facilities since 1901, the year 
in which the report of the Joint Commission to investigate the Postal Service 
was made. In fact, all changes in railway operating costs, except those due 
to increased efficiency of organization and management, which can have little, 
if any, effect in connection with mail traffic, have been in the opposite direction. 
During the years characterized by these reductions the railways have been 
called upon continually to improve the character of their postal service and 
the Post Office Department will not deny that the railways are now rendering 
better, more frequent, and more expeditious postal service than in 1901, or any 
intermediate year, and are doing so at greatly increased cost to themselves. 

In view of these thoroughly substantiated facts the drastic reductions of 
recent years afford unanswerable proof that railway mail pay is now too low. 

IX. THE ADMINISTRATION OF THE POST OFFICE DEPARTMENT HAS NOT, IN THE 
LAST 12 YEARS, EFFECTED ANY REDUCTION IN THE ANNUAL TOTAL OF ITS EX¬ 
PENSES FOR OTHER PURPOSES THAN RAILWAY TRANSPORTATION OR IN THE PRO¬ 
PORTION OF ITS REVENUES REQUIRED FOR SUCH OTHER EXPENSES, BUT THE WHOLE 
SAVING WHICH HAS NEARLY ELIMINATED THE ANNUAL DEFICIT OF THE DEPART¬ 
MENT IS REPRESENTED BY THE REDUCED PAYMENTS, PER UNIT OF SERVICE, TO 
THE RAILWAYS. 

That the recent savings of the postal service have been wholly at the expense 
of the railways is shown by the following: 



1901 

1911 

Postal gross receipts. 

$111,631,193 

$237,879,823 

$238,507,669 
] (X). 3 

Postal expenses, all purposes: 

Total. 

$115,554,921 
103.5 

Per cent of gross receipts. 

Railway mail pay: 

Total.. . 

$38,158,969 
34.2 

$50,583,123 
21.3 

Per cent of gross receipts. 

Postal expenses other than railway mail pay: 

Total. 

$77,395,952 
69.3 

$187,924,546 
79.0 

Per cent of gross receipts. 



This table shows that in the 10 years from 1901 to 1911 the Post Office 
Department reduced its operating ratio between its total expenses and its gross 
receipts from 103.5 per cent to 100.3 per cent, being a reduction of 3.2 points; 
but it also shows that this improvement was due solely to the fact that the 
ratio of railway mail pay expenses to gross receipts was reduced from 34.2 
per cent to 21.3 per cent, a reduction of 12.9 points, while the ratio of all other 
expenses to gross receipts increased from 69.3 per cent to 79 per cent, an in¬ 
crease of 9.7 points. Thus the improvement of 3.2 points in the ratio for all 
expenses was due entirely to the greatly reduced ratio of railway mail pay, 
the heavy reduction in that respect exceeding by 3.2 points the very substantial 
increase in the ratio of all other expenses. 

During the 10 years from 1901 to 1911 the department took up an enormous 
increase in business at a greatly decreased cost for railway transportation and 
at a largely increased cost for other purposes. It cost the department, for 
purposes other than railway transportation, nearly nine-tenths of $126,248,630 
to add that amount to its gross receipts (although for these other purposes it 
had previously spent less than seven-tenths of its gross receipts), while it re¬ 
quired less than one-tenth of the same sum to pay for the added railway 
transportation that the new business required (although at the beginning of 
the period railway transportation had cost more than one-third of the gross 
receipts). This startling comparison fully warrants the conclusion that the 
power of Congress and the department has been exercised to force upon the 
railways, by reducing the payments for their services, the burden not only of 
the effort to eliminate the annual postal deficit but of considerable increases 
in other forms of postal expenditure. No reference to rural free delivery will 
serve to explain away the conclusion suggested by this comparison, especially 
since only a fraction of the cost of that service represents really an additional 
net outlay. This service has permitted a reduction of one-third in the number 
of post offices and has been in many cases substituted for star route service 
and the savings thus permitted ought to be credited to it before determining 
its cost. 

74972—13-2- - 


















18 


RAILWAY MAIL PAY. 


That increases in postal expenditures were necessary between 1901 and 1911 
is not denied. The period was one in which steady and extensive increases in 
the cost of living made necessary considerable increases in the salaries of postal 
employees and in the cost of postal supplies, precisely as the railways were im¬ 
pelled to increase the salaries and wages of their employees and were obliged 
to pay higher prices for their supplies. In other words, the purchasing power 
of the American dollar, and of standard money everywhere, greatly decreased 
and this decrease affected the Post Office Department as it has affected every 
business undertaking. But the purchasing power of the railway dollar de¬ 
creased exactly as that of all other dollars and it was unreasonable and unjust 
that while this change was in progress the losses which it entailed in the postal 
service of the Government should be shifted, as it has been shown that they 
were, to the railways which were, at the same time, suffering far greater 
losses from the same cause. 

X. THE CONTINUOUS REFUSAL OF THE POST OFFICE DEPARTMENT TO ORDER REWEIGII- 
INGS OF THE MAILS EXCEPT AFTER THE MAXIMUM INTERVAL OF FOUR YEARS, 
WHICH THE LAW ALLOWS, THE DEMANDS FOR STATION AND TERMINAL SERVICES 
THAT ARE RENDERED WITHOUT ANY OR WITHOUT ADEQUATE COMPENSATION, AND 
THE UNJUST DISCRIMINATION AGAINST COMPARTMENT CARS USED AS RAILWAY 
POST OFFICES ARE ALL ABUSES, SERIOUSLY INJURIOUS TO THE RAILWAYS, WHICH 
HAVE GROWN UP UNDER THE PRESENT SYSTEM OF PAYMENT AND OUGHT AT ONCE 
TO BE REMEDIED. 

In addition to the inadequacies in the rates of pay provided under the present 
law, which result in payments that do not leave any balance for taxes or 
return upon property and, indeed, do not even meet operating expenses, there 
are certain conditions which have grown up in the application of the existing 
basis of pay that ought to be rectified. This is especially necessary in view of 
the tendency, herein shown, of the Post Office Department to apply the system 
so as to reduce its expense for railway transportation, and to look to this item 
as the chief or sole source of economies. 

The transportation pay received for each railway route is determined, under 
the practice of the department, for a period of four years on the basis of the 
average daily weight carried during a period of about three months’ duration 
prior to the beginning of the period for which it is fixed. Thus, by the terms 
of the law, the Government upholds the principle that weight should be the 
basis of payment, but, by an inconsistent practice, denies that principle and 
creates a condition under which it is practically certain that the weight actually 
carried will differ materially from the weight paid for. Congress, surely, never 
intended this result, for the provision of law is, merely, that the mail shall be 
weighed “not less frequently” than once in four years and clearly implies an 
intention that it should be weighed whenever a substantial change in volume 
has taken place. But the Post Office Department controls, subject to the pro¬ 
vision of law, the frequency of the weighings, and naturally seeks those reduc¬ 
tions in its expenses which can be effected without loss anywhere except in 
railway revenues. Consequently, it long ago ceased to order new weighings, 
except when compelled to do so by the expiration of the statutory limit. It 
thus happens that while the railways are paid on the basis of a certain average 
daily weight they are frequently carrying a much greater weight and with no 
compensation whatever for the increase in the weight. In other instances the 
change is in the opposite direction, but with increasing national population and 
wealth it is obvious that most of these changes must be to the injury of the 
railways. However, the element of uncertainty thus introduced into each con¬ 
tract is unbusinesslike and in fairness to both parties ought to be removed. No 
railway would make, a four years’ contract to carry, for a definite sum, the 
unlimited output of any manufacturing plant, and if it attempted to do so the 
contract would be void under the interstate-commerce law. The terms of the 
mail contracts are substantially dictated by the Postmaster General and by 
Congress, and the latter ought, in justice both to the railways and to the Gov¬ 
ernment. to require the former to make annual weighings in order that the 
scheme of payment provided in the law may be fairly and accurately applied. 

Railways are required to transfer the mails between their stations and all 
post offices not more than a quarter of a mile distant from the former and, at 
the election of the Post Office Department, to make similar transfers at ter¬ 
minals. For the former no compensation is accorded, and for the latter the 
allowances are inadequate. There are numerous instances in which these extra 
services require expenditures, on the part of the railways concerned, that ex- 


RAILWAY MAIL PAY. 


19 


ceeil the total compensation of the mail routes on which they occur. The extent 
of these requirements in particular cases is largely subject to the will of the 
department and this produces unreasonable uncertainties as to what may be 
demanded during the life of any contract. The basis of payment plainly does 
not contemplate such service; they are a survival from the period when the 
mails were carried by stagecoaches, which could readily deviate these dis¬ 
tances from their ordinary routes, and it is clear that the Government ought 
to perform these services itself or reasonably compensate the railways therefor. 

Much of the mail moved by the railways is carried in cars especially equipped 
as traveling post offices in order that it may be accompanied by postal clerks 
who perform, on the journey, precisely the labor which they would otherwise 
perform in local post offices. Cars so used can be but lightly loaded and are 
costly to supply, to equip, to maintain and to move. Their use has greatly 
increased the efficiency of the postal service and vastly expedited the handling 
of the mails. In the infancy of this service Congress provided for additional 
payments for the full cars so required, but when the practice of requiring por¬ 
tions of cars for the same identical purpose was inaugurated no provision for 
paying for them was made and this condition never has been corrected. Even 
in Document No. 105, the injustice of this situation is recognized (p. 3) and 
the Postmaster General asserts that it is a purely arbitrary discrimination and 
without logical basis. Obviously a reasonable allowance for apartment cars 
ought to be made. 

XI. THE POSTMASTER GENERAL’S PROPOSED PLAN OF PAYMENT BASED UPON OPER¬ 
ATING COST AND TAXES, TO BE ASCERTAINED BY THE POST OFFICE DEPARTMENT. 

PLUS G PER CENT, IS SERIOUSLY WRONG IN PRINCIPLE AND WOULD ENCOURAGE 

AND PERPETUATE INJUSTICE. 

The foregoing discussion makes plain the error and injustice in the Post¬ 
master General’s proposal to pay the railways for carrying the mail upon the 
basis of returning to them the operating expenses and taxes, as ascertained by 
the Post Office Department, attributable to the carriage of the mails, plus 0 
per cent of the sum of these expenses and taxes. 

The discussion under heading III above demonstrates that the plan leaves out 
of < onsideration any allowance for return upon the property and would be de- 
stru five of the universally recognized rights of the railroad companies. 

Furthermore, such a plan is fundamentally erroneous because it involves pay¬ 
ing the highest rates to the railroad that by reason of physical disabilities or 
ineffident methods is most expensively operated and the lowest rates to the 
railroad which, by reason of the highest efficiency, operates at the lowest cost. 
A railroad’s superior operating efficiency is frequently due to exceptionally 
heavy capital expenditures to obtain low grades, two, three, or four main tracks, 
and to improve in other respects the roadbed and tracks to the end that trains 
may be hauled at the lowest expense. Such a railroad needs and is entitled to 
sufficient net earnings to enable it to pay a proper return upon the increased 
value which is due to such expenditures. But under the Postmaster General’s 
plan a railroad would be penalized for all the capital expenditures made by it 
for the purpose of decreasing its operating cost, because the more it decreased 
its operating cost the more it would decrease its mail pay. 

The ascertainment of the cost to a railroad of conducting mail service is 
necessarily very largely a matter of judgment and opinion, because a large 
proportion of the total operating expenses are common to the freight and pas¬ 
senger traffic and can only be approximately apportioned. There is room for a 
very wide discretion in the making of such apportionments. It would not be 
right or proper to intrust the Post Office Department with the discretion of 
making such apportionment, because the Post Office Department has an obvious 
interest at stake, its object always being to reduce the railroad pay to a mini¬ 
mum. 

The last preceding statement is fully justified by the facts disclosed by the 
foregoing pages, which show how consistently the Post Office Department has 
relied upon reductions in railway mail pay as the ever available source of de¬ 
sired curtailments of expenses, and how unsuccessfully the railways have re¬ 
sisted this persistent pressure. They show that successive Postmasters General 
have taken advantage of every legal possibility, such as taking the longest time 
between mail weighings which the law permits and the strained interpretation 
of the statute fixing the basis of payment (p. 19), in order to effect reductions 
in railway mail pay. Consequently, the facts point irresistibly to one conclu¬ 
sion. namely, that the Post Office Department is a bureaucratic entity with an 


20 


RAILWAY MAIL PAY. 


interest in the reduction of the amounts paid to the railways that is incompati¬ 
ble with an impartial ascertainment of what is fair compensation. This inter¬ 
est, coupled with the brief tenure of the responsible officers of the department, 
must always incline the latter to support insufficient standards of mail pay and 
prevent their recognizing the ultimate necessity of paying fairly for efficient 
service. It would, therefore, he clearly inexpedient and strikingly unjust to 
place railway mail revenues wholly at the mercy of the department by enacting 
a law which would authorize each Postmaster General to fix railway mail pay 
on the basis of his own inquiries and opinions in a field in which so much must 
be left to estimate and approximation as that of the relative or actual cost of 
the different kinds of railway service. 

It is conceded that every railway mail contract is between the Government, 
which is the sovereign, and a citizen, and that the nature and terms of the con¬ 
tract are always substantially to be dictated by the former. But this very 
condition invokes the principle of primary justice, that the sovereign shall take 
care to exercise its power without oppression. To this end the determination 
of the terms on which the Post Office Department may have the essential 
services of the railways ought to he reserved, as at least partially in the past, 
to the Congress, or if delegated at all, they should be intrusted to some bureau 
or agency of Government not directly and immediately interested in reducing 
railway mail pay below a just and reasonable compensation. 

Appendix A. 

EXTRACTS FROM TIIE POSTAL LAWS AND REGULATIONS. 

Railroad companies, at stations where transfer clerks are employed, will 
provide suitable and sufficient rooms for handling and storing the mails, and 
without specific charge therefor. These rooms will be lighted, heated, furnished, 
supplied with ice water, and kept in order by the railroad company. (Sec. 
1186, par. 2.) 

The specific requirements of the service as to * * * space required * * * 
at stations, fixtures, furniture, etc., will at all times be determined by the Post 
Office Department and made known through the General Superintendent of 
Railway Mail Service. (Sec. 1186. par. 3.) 

Railroad companies will require their employees who handle the mails to keep 
a record of all pouches due to be received or dispatched by them, and to check 
the pouches at the time they are received or dispatched, except that no record* 
need be kept of a single pouch from a train or station to the post office or from 
the post office to a train or station which, in regular course, is the only pouch 
in the custody of the company’s employees at that point while it is being 
handled by them. This is not to be construed as relieving railroad companies 
from having employees on trains keep and properly check a record of all closed 
pouches handled by them, without exception. (Sec. 1187, par. 1.) 

In case of failure to receive any pouch due, a shortage slip should be made 
out, explaining cause of failure, and forwarded in lieu of the missing pouch. 
Specific instructions in regard to the use of shortage slips will be given by the 
General Superintendent of Railway Mail Service. (Sec. 1187, par. 2.) 

Every irregularity in the receipt and dispatch of mail should be reported by 
the employee to his superintendent promptly, and if a probable loss of or damage 
to mail is involved, or if the cause of failure to receive a pouch is not known, 
the report should be made by wire, and the superintendent will notify the divi¬ 
sion superintendent of Railway Mail Service without delay. A copy of the 
employee’s report should be attached to and become a part of the permanent 
pouch record. (Sec. 1187, par. 3.) 

Train pouch records will be kept on file at the headquarters of division 
superintendents of railroad companies for at least one year immediately fol¬ 
lowing the date the mail covered by them was handled, and shall be accessible 
(here to post-office inspectors and other agents of the Post Office Department. 
Station pouch records will be kept on file at the station to which they apply 
for at least one year immediately following the date the mail covered by them 
was handled, and shall be accessible there to post-office inspectors and other 
agents of the Post Office Department. (Sec. 1187. par. 4.) 

Railroad companies will require their employees to submit pouch records for 
examination to post-office inspectors and other duly accredited agents of the 
Post Office Department upon their request and exhibition of credentials to such 
employees. (Sec. 1187, par. 5.) 

Every railroad company is required to take the mails from and deliver them 
into all terminal post offices, whatever may be the distance between the station 


RAILWAY MAIL PAY. 


21 


and post office, exc ept in cities where other provision for such service is made 

the ] ost Office Department. In all cases where the department has not made 
ot lei pio\ ision, the distance between terminal post office and nearest station 
is computed in and paid for as part of the route. (Sec. 1191, par. 1.) 

1 he lailroad company must also take the mails from and deliver them into 
all intermediate post offices and postal stations located not more than SO rods 
liom the nearest railroad station At which the company has an agent or other 
lepiesentative employed, and the company shall not he relieved of such duty on 
account of the discontinuance of an agency without 30 days’ notice to* the 
department. (Sec. 1191, par. 2.) 

At connecting points where railroad stations are not over SO rods apart, a 
company having mails on its train to he forwarded by the connecting train will 
he required to transfer such mails and deliver them into the connecting train, 
or, if the connection is not immediate, to deliver them to the agent of the com¬ 
pany to he properly dispatched by the trains of said company. (Sec. 1192.) 

At places where railroad companies are required to take the mails from and 
deliver them into post offices or postal stations or to transfer them to connect¬ 
ing railroads, the persons employed to perform such service are agents of the 
companies and not employees of the postal service and need not he sworn: 
but such persons must he more than 16 years old and of suitable intelligence 
and character. Postmasters will promptly report anv violation of this require¬ 
ment. (Sec. 1193.) 

'W here it is desirable to have mails taken from the post office or postal station 
to train at a terminal point where the terminal service devolves upon the com¬ 
pany, in advance of the regular time of closing mails, the company will be 
required to make such advance delivery as becomes necessary by the require¬ 
ments of the service. (Sec. 1194.) 

When a messenger employed by the Post Office Department can not wait for 
a delayed train without missing other mails, the railroad company will be 
required to take charge of and dispatch the mails for the delayed train, and will 
be responsible for the inward mail until delivered to the messenger or other 
authorized representative of the department. (Sec. 1195.) 

Whenever the mail on any railroad route arrives at a late hour of the night 
the railroad company must retain custody thereof by placing the same in a 
secure and safe room or apartment of the depot or station until the following 
morning, when it must be delivered at the post office, or to the mail messenger 
employed by the Post Office Department, at as early an hour as the necessities 
of the post office may require. (Sec. 1196.) 

When a train departs from a railroad station in the nighttime later than 
9 o’clock, and it is deemed necessary to have the mail dispatched by such train, 
the division superintendent of Pail way Mail Service will, where mail is taken 
from and delivered into the post office by the railroad company, request the 
company, or where a mail messenger or carrier is employed by the Post Office 
Department, will direct him. to take the mail to the railroad station at such 
time as will best serve the interest of the mail service. Such mail will be taken 
charge of by the agent or other representative of the railroad company, who 
will be required to keep it in some secure place until the train arrives, and 
then see that it is properly dispatched. (Sec. 1197, par. 1.) 

The division superintendent of Railway Mail Service will give reasonable 
advance notice to the proper officer of the railroad company, in order that the 
agent or representatives of the company may be properly instructed. (Sec. 1197, 
par. 2.) 

Railroad companies will be expected to place their mail cars at points acces¬ 
sible to mail messengers or contractors for wagon service. If cars are not so 
placed the companies will be required to receive the mails from and deliver them 
to the messengers or contractors at points accessible to the wagon of the mes¬ 
senger or contractor. (Sec. 1198.) 

A mail train must not pull out and leave mails which are in process of being 
loaded on the car or which the conductor or trainman has information are be¬ 
ing trucked from wagons or some part of the station to the cars. (Sec. 1199.) 

At all points at which trains do not stop where the Post Office Department 
the exchange of mails necessary, a de\ ice foi the receipt and delixeij 
of mails satisfactory to the department must be erected and maintained; and. 
pending the erection of such device, the speed of trains must be slackened so as 
to permit the exchange to be made with safety. (Sec. 1200, par. 1.) 

In all cases where the department deems it necessary to the safe exchange of 
the mails the railroad company will be required to reduce the speed or-.stop the 
train. (Sec. 1200, par, 2.) 


22 


EAILWAY MAIL PAY. 


When night mails are caught from a crane the railroad company must fur¬ 
nish the lantern or light to be attached to the crane and keep the same in 
proper condition, regularly placed and lighted; but if the company has no 
agent or employee at such station, the company must furnish the light, and the 
care and placing of same will devolve upon the department’s carrier. (Sec. 
1200, par. 3.) 

The engineer of a train shall give timely notice, by whistle or other signal, 
of its approach to a mail crane. (Sec. 1200, par. 4.) 

Railroad companies are required to convey upon any train, without specific 
charge therefor, all mail bags, post-office blanks, stationery, supplies, and all 
duly accredited agents of the Post Office Department and post-office inspectors 
upon the exhibition of their credentials. (Sec. 1184.) 

Appendix P>. 

Classification of operating expenses. 

[Data from reports of the Interstate Commerce Commission.] 


Average cost per mile of line. 


Class. 

Fiscal year 1910. 

November, 1909. 

Monthly average 
for the other 11 
months of the fiscal 
year. 

Amount. 

Monthly 

average. 

Amount. 

Per 
cent of 
monthly 
average 
for the 
fiscal 
year. 

Amount. 

Per 

cent of 
monthly 
average 
for the 
fiscal 
year. 

Maintenance of way and structures. 

Maintenance of equipment. 

Traffic expenses. 

Transportation expenses. 

General expenses. 

Total. 

$1,562. 88 
1,746.00 
220. 61 
2,893. 71 
287. 71 

$130.24 
145.50 
18.38 
324.48 
23.98 

$124.04 
148.44 
18.85 
327. 78 
23.10 

95.24 
102.02 
102.56 
101.02 
96.33 

$130.80 
145.23 
18.34 
324.18 
24.06 

100.43 
99.82 
99. 78 
99.91 
100.33 

7,710.91 

642.58 

642. 21 

99.94 

642. 61 

100.00 


Appendix C. 

Receipts from passenger and freight traffic, by months. 

[Data from reports of the Interstate Commerce Commission.] 



Passenger receipts per mile 
of line. 

Freight receipts per mile 
of line. 

Per cent of 
passenger 
receipts to 
receipts 
from both 
passengers 
and freight. 

Month. 

Total. 

Daily 

average. 

Per cent 
of daily 
average 
for year. 

Total. 

Daily 

average. 

Per cent 
of daily 
average 
for year. 

1909. 

July. 

$251.66 

$8.12 

112.15 

$608.67 

$19.63 

88.46 

29.25 

August. 

269. 70 

8. 70 

120.17 

653.97 

21.10 

95.09 

29. 20 

September. 

254.95 

8.50 

117.40 

704.51 

23.48 

105.81 

26.57 

October. 

231.80 

7.48 

103.31 

781.91 

25.22 

113.65 

22.87 

November. 

206.69 

6.89 

95.17 

752.69 

25.09 

113.07 

21.54 

December. 

211.55 

6.82 

94.20 

640. 59 

20.66 

93.11 

24.83 

1910. 

January.. 

187.42 

6.05 

83.56 

618.06 

19.94 

89.86 

23.27 

February. 

171.92 

6.14 

84.81 

603. 76 

21.56 

97.16 

22.16 

March. 

202.61 

6. 54 

90.33 

716.76 

23.12 

104.19 

22.04 

April. 

203. 84 

6.79 

93.78 

658.93 

21.96 

98.96 

23.63 

May. 

218.47 

7.05 

97.38 

682.96 

22.03 

99.28 

24.24 

June. 

233.25 

7.78 

107.46 

674.97 

22.50 

101.40 

25.68 

Average. 

220.32 

7.24 

100. 00 

674. 81 

22.19 

100.00 

24.61 
























































RAILWAY MAIL PAY. 


23 


Appendix D. 

IIOW RAILWAY WAGES HAVE INCREASED. 

Iii the year 1901 the railways reporting to the Interstate Commerce Commis¬ 
sion received, in gross, from operating sources the sum of $1,588,526,037 and 
expended in wages and salaries the sum of $610,713,701; in 1910 the correspond¬ 
ing totals were $2,750,667,435 and $1,143,725,306. Computations from these 
totals show that in 1901 the railways expended in wages and salaries $38.45 out 
of each $100 of gross operating receipts, while in 1910 the proportion had in¬ 
creased to $41.58, a difference of $3.13 in each $100 of gross receipts. This 
difference does not seem small, but it is hardly realized, except when the calcu¬ 
lation is made, that on the basis of the gross receipts of 1910 it would amount, 
as it does, to an additional expense of $86,095,890.72. It is to be borne in mind 
that this largely increased payment to labor is in spite of the fact that a part 
of the increase in wage rates has been offset by higher efficiency in method and 
facilities. Comparisons of rates of wages, from the annual statistical reports 
of the Interstate Commerce Commission, follow: 


Class of employees. 


General office clerks. 

Station agents. 

Other station men. 

Enginemen. 

Firemen. 

Conductors. 

Other trainmen. 

Machinists. 

Carpenters. 

Other shopmen. 

Section foremen. 

Other trackmen... 

Telegraph operators and dispatchers— 
Employees, account floating equipment 
All other employees and laborers. 


Average wages per day. 


1901 

1910 

Increase. 

$2.19 

$2.45 

Per cent. 
11.87 

1.77 

2.14 

20.90 

1.59 

1.91 

20.13 

3.78 

4.34 

14.81 

2.16 

2.57 

18.98 

3.17 

3.73 

17.67 

2.00 

2.72 

36.00 

2.32 

3.03 

30.60 

2.06 

2.39 

16.02 

1.75 

2.20 

25.71 

1.71 

1.99 

16.37 

1.23 

1.57 

27.64 

1.98 

2.16 

9.09 

1.97 

2.10 

6.60 

1.69 

1.96 

15.98 


Appendix E. 


HOW RAILWAY TAXES HAVE INCREASED. 

[Data from reports of tbe Interstate Commerce Commission.] 


1900. 

1901- 

1902. 

1903. 

1904. 

1905. 

1906. 

1907. 
19081 

1909 i 

1910 i 


Year. 

Amount paid. 

Average 
per mile 
operated. 

Per cent 
of net re¬ 
ceipts. 


$48,332,273 

50,944,372 

$251.00 

8.7 


260.50 

8.6 


54,465, 437 

272.12 

8.3 


57,849,569 
61,696,354 

281.76 

8.4 


290.69 

9.0 


63,474,679 

292.55 

8.5 


74,785,615 

80,312,375 

336.36 

8.8 


353.09 

8.9 


84,555,146 

366. 84 

10.7 


90,529,014 

384.57 

10.1 


103,795,701 

430. 99 

10.3 





i Not including terminal and switching companies. 


LIST OF RAILROADS EXPRESSLY INDORSING FOREGOING BRIEF. 

The following railroads, represented by the officials indicated, have 
responded to my circular letter of September 11, by referring to and 


















































24 


RAILWAY MAIL PAY. 


giving their indorsement of the response of the committee on rail¬ 
way mail pay: 


Augusta Southern Railroad Co., A. B. Andrews, president. 

Atchison. Topeka & Santa Fe System, George T. Nicholson, vice president. 

Atlantic Coast Line Railroad Co., T. M. Emerson, president. 

Arizona Eastern Railroad Co., Epes Randolph, president. 

Arkansas, Louisiana & Gulf Railway Co.. J. M. Parker, general manager. 

Bellingham Bay & British Columbia Raiiroad Co., Mott Sawyer, superin¬ 
tendent. 

Blue Ridge Railway Co., A. B. Andrews, president. 

Chicago & Alton Railroad Co., P>. A. Worthington, president. 

Coal & Coke Railway Co.. A. M. Smith, general manager. 

Central Vermont Railway Co., G. C. Jones, general manager. 

Cornwall & Lebanon Railroad Co., A. D. Smith, president and general 
manager. 

Chicago & Western Indiana Railroad Co. and.The Belt Railway Co., of Chi¬ 
cago, J. M. Warner, general manager. 

Colorado Midland Railway Co., George M. Vallery, president. 

Central Indiana Railway Co., Joseph Robinson, president. 

Chicago, Indianapolis & Louisville Railway Co.. Fairfax Harrison, president. 

Carolina, Clinchfield & Ohio Railway. Mark W. Potter, president. 

Central of Georgia Railway Co., Charles H. Markham, president. 

Chesapeake & Ohio Railway Co., M. J. Caples, fourth vice president. 

Denver, Northwestern & Pacific Railway Co., W. A. Beerbower, general super¬ 
intendent for receivers. 

Delaware & Hudson Co., L. L. Loree. president. 

Danville & Western Railway Co.. A. B. Andrews, president. 

Delaware <& Hudson Co., C. S. Sims, second vice president and general 
manager. 

Delta Southern Railway, R. V. Taylor, president. 

Erie Railroad Co., J. C. Stuart, vice president. 

Great Northern Railway Co., Carl R. Gray, president. 

Georgia Northern Railway Co., C. W. I’ideock, president. 

Georgia Railroad, Thomas K. Scott, general manager. 

Gulf & Ship Island Railroad Co., W. T. Stewart, vice president and general 
manager. 

Georgia & Florida Railway, W. B. Denham, general manager. 

Hartwell Railway Co., A. B. Andrews, president. 

Hocking Valley Railway Co., M. S. Connors, general manager. 

Huntington & Broad Top Mountain Railroad & Coal Co., Carl M. Gage, 
president and general manager. 

Illinois Central Railroad Co., C. H. Markham, president. 

Kansas City, Clinton & Springfield Railway Co., E. J. Perry, vice president. 

Kansas City, Mexico & Orient Railway Co., Neal S. Doran, auditor for re¬ 
ceivers. 

Kansas City Southern Railway Co., J. A. Edson, president. 

Las Vegas & Tonopah Railroad Co.. J. Ross Clark, president. 

Lehigh & Hudson River Railway Co., Morris Rutherford, vice president and 
general manager. 

Lehigh & New England Railroad Co., Rollin PI. Wilbur, vice president and 
general manager. 

Lexington Terminal Railroad Co.. Thos. K. Scott, vice president. 

Maine Central Railroad Co., Morris McDonald, vice president and general 
manager. 

Macon, Dublin & Savannah Railroad, S. T. Wright, vice president and general 
manager. 

Manistee & Grand Rapids Railroad Co., Chas. H. Morey, vice president. 

Minneapolis, St. Paul & Sault Ste. Marie Railway Co., E. Pennington, presi¬ 
dent. 

Missouri, Kansas & Texas Railway Co., W. A. Durham, assistant general 
manager. 


Missouri & North Arkansas Railroad, George L. Sands, receiver. 

Missouri, Kansas & Texas Railway Co.; Missouri, Kansas & Texas Railwav 
Co. of Texas; Texas Central Railroad Co.; Wichita Falls Lines; W. A Webb 
general manager. 

Montana, Wyoming & Southern Railroad Co., M. W. Maguire general man¬ 
ager. 


RAILWAY MAIL PAY. 


25 


Mobile & Ohio Railroad Co., R. V. Taylor, vice president and general man¬ 
ager. 

Nashville, Chattanooga & St. Louis Railway, J. W. Thomas, jr., president and 
general manager. 

New York, Auburn & Lansing Railroad, H. A. Clarke, general manager for 
receivers. 

New York Central Lines, W. C. Brawn, president. 

New York, Chicago & St. Louis Railroad Co., A. W. Johnston, general man¬ 
ager. 

New York, Ontario & Western Railway Co., John B. Kerr, vice president. 

Norfolk Southern Railroad Co., Morris S. Hawkins, secretary. 

Northwestern Pacific Railroad Co., A. H. Payson, president. 

Oregon-Washington Railroad & Navigation Co., J. D. Farrell, president. 

Pacific Railway & Navigation Co., D. W. Campbell, president. 

Pere Marquette Railroad Co., S. M. Felton, receiver. 

Ray & Gila Valley Railroad Co., D. C. .Tackling, vice president and general 
manager. 

Richmond, Fredericksburg & Potomac R. R. Co., Wm. H. White, president. 

Rock Island Lines, John Sabastian, third vice president. 

Rutland Railroad Co., Geo. T. Jarvis, general manager. 

Salem Falls City & Western Railway, D. W. Campbell, president. 

San Antonio & Aransas Pass Railway Co., J. S. Peter, first vice president and 
general manager. 

San Pedro, Los Angeles & Salt Lake Railroad, H. C. Nutt, general manager. 

Spokane, Portland & Seattle Railway Co., J. H. Young, president. 

Southern Pacific Railroad Co., William Sproule, president. 

Southern Railway Co., A. B. Andrews, first vice president. 

Southern Railway Co., in Mississippi, R, V. Taylor, vice president and general 
manager. 

St. Louis, Rocky Mountain & Pacific Railway Co., J. Van Houten, president. 
Tallulah Falls Railway Co., A. B. Andrews, president. 

Tonopah & Goldfield Railroad Co., M. B. Cutter, president. 

Union Pacific Railroad Co., Oregon Short Line Railroad Co., A. L. Mohler, 
president. 

Union Point & White Plains Railroad Co., Thomas K. Scott, general manager. 

Virginia & Carolina Southern Railroad Co., J. I*. Russell, general superin- 
t endeht. 

Virginia & Southwestern Railway Co., E. LI. Coapman, vice president and 
general manager. 

Wadley Southern Railway Co., William A. Winburn, president. 

Wheeling & Lake Erie Railroad Co., W. M. Duncan, receiver. 

Winston-Salem Southbound Railway Co.. II. E. Fries, president. 

Yazoo & Mississippi Valley Railroad Co., C. H. Markham, president. 

VIEWS OF SHORT-LINE RAILROAD ASSOCIATION. 

Under date of December 31, 1012, the Short Line Railroad Asso¬ 
ciation, by Mr. John X. Drake, its secretary and treasurer, represent¬ 
ing- independent short-line mail-carrying railroads, operating in every 
section of the country, submitted the following letter: 

Short Line Railroad Association, 

Yc/r York, December J/. 1912. 

Committee on Post Offices and Post Roads, 

United States Senate, Washington, 1). C. 

Gentlemen: The Short Line Railroad Association, representing independent 
short-line mail-carrying railroads, operating in every section of the country. 
be< r s to submit for your consideration their plea for fair and equitable treat¬ 
ment based upon reasonable compensation for the services they render the 

Government. , ..... . ., , 

Their pay now, notwithstanding the increased facilities they have proMded 
and the increased responsibilities they have assumed, with the additional cost 
incident thereto, is less by 10 per cent than it was prior to the act of July 12. 
INTO and 5 per cent additional to that since July, 1878. It has also decreased 
one-seventh since 1907. when the Post Ofiiee Department, in contravention to 
law and established custom, changed the divisor from six days to seven. 


26 


RAILWAY MAIL PAY. 


In tlie early days of railway mail transportation the small quantity of mail 
carried by the few short-line railroads was in mail bags placed in any con¬ 
venient location in the baggage cars. As the labor and expense of hauling this 
light mail was negligible, no objection was made to its delivery at the post 
offices located at terminals, nor to observing the obsolete English custom 
adopted by the Post Office Department, which obtained in the old stagecoach 
days, of delivering mail at post offices SO rods or less from the post roads. One 
mail a day was the limit of the service, and the little packages were easily 
handled and delivered by an employee of the road, whose pay then was small 
and who had plenty of time to give the slight service, without interfering with 
his other duties. 

In the great developments which have taken place since those bygone days 
short-line railroads have multiplied a hundredfold, the little mail pouch has 
grown to an apartment car, the small bundle for delivery to a wagonload. The 
march of progress and improvement has permeated every branch of the rail¬ 
way mail service, and will continue to do so if properly supported by the Gov¬ 
ernment. The little mail-carrying roads, however, can not meet growing de¬ 
mands handicapped by obsolete customs and unbusinesslike methods. They 
can not donate in the future, as in the past, their car space, and fit it up at 
their own expensb as a post office, carrying mail messengers to perform post- 
office duties without being recompensed in some slight degree for the service. 

In the experimental stage of using apartment-car space in addition to full- 
car space for post-office purposes our roads readily granted the privilege, under 
the assumption that the Government when it had demonstrated the feasibility 
and usefulness of the method they had adopted would unhesitatingly amend 
the law granting pay for a 40 foot or more car in length to cover those of 
lesser extent. No provision, however, has been made to do this nor has any 
disposition been displayed on the part of the Government to take such action. 
From a few apartment cars used as auxiliaries to help out full cars, the growth 
has been marvelous and unprecedented—3,800 apartment cars last year against 
1.464 full cars. Full cars entitled to receive pay under the law will soon cease 
to be used except upon the largest railroad systems, if the present policy of the 
Post Office Department is permitted to continue without suitable regulation by 
law. In order to accomplish this purpose it is only necessary for the depart¬ 
ment to split hairs and order a 35 or a 38, or even a 39 foot car. 

The short-line railroads are not asking subsidies or special privileges, but 
they do ask that they be treated with the same consideration and accorded the 
same rights granted to other systems of railroads for a like service. They 
simply want justice and a square, straightforward, honorable business deal. 
Nothing more nor less. They are entitled by every consideration that gov¬ 
erns a business community to receive their proportion of the pay given for the 
use of any car performing the same character of service they perform, whether 
the space used is 5 feet or 60 feet. 

The claim is made that the short-line railroads are now paid for carrying 
the mails. This is only true as applied to the weight, and is equally true in 
the same regard to any other system of railroads. 

The use of the postal car, no matter what its length, is invaluable in contrib¬ 
uting to the present requirements of the service in facilitating the prompt de¬ 
livery of the mail in the city or in the country, and the car fitted up as a post 
office and given over exclusively to the use of the mails is an honest charge 
against the Government and is as much entitled to be paid for as post-office 
space in a city or town. 

A provision covering this entirely satisfactory to the short-line railroads is 
inserted in the amendments to the present law governing railway mail pay as 
introduced by Representative Talbott in H. R. 4044. and reads as follows: 

“ That the space used for railroad post-office purposes in apartment cars 
shall be paid for at a pro rata rate of the rate of compensation allowed for postal 
cars 40 feet in length.” 

In a recent decision given in a United States district court regarding the 
right of the Post Office Department to enforce its regulations governing the 
use of apartment cars without pay, the court ruled that the road had no 
redress in the matter while working under the contract made with the depart¬ 
ment, but could refuse to renew the contract and discontinue the service. 

The alternative is here presented of seriously embarrassing the postal service 
and harshly discommoding the people along the railroad lines by terminating 
the service or by penalizing the roads for their efficient service if they continue 
to act as mail carriers. 


RAILWAY MAIL PAY. 


27 


Can and will the Government as a just arbitrator consent to perpetuate a 
notoriously glaring injustice at tlie expense of tlie short-line railroads, or force 
them to abandon it as an unprofitable service which they are financially unable 
to maintain? 

Again, the mail-carrying compensation on the short-line railroads, in ac¬ 
cordance with a Post Office Department regulation, is not determined by the 
distance covered by the train service, but is computed to include the distance 
over the public highway to the post office depending upon the railroad service 
for its mail. Some of these post offices are a mile, more or less, from the rail¬ 
road stations. It can readily be seen that a highway service, however prim¬ 
itive it may be, if used to carry the mail any distance from the railroad sta¬ 
tion can not be maintained at the same rate per mile per year that is paid for 
rail road transportation. 

A short-line railroad, 10 miles in length, with a post office half a mile dis¬ 
tant from its station receives $42.75 per mile per year, or $427.50 for its year’s 
work on the train mileage and $21.37 for the highway service, a total of 
$448.87. The little stretch of half a mile on the highway, at a very conserva¬ 
tive estimate, costs 75 cents a day, or $262.50 per year, thus reducing the rail¬ 
way mail pay actually received to $226.37, more than one-half. In no instance 
is the railway mail service performed by the short-line railroads without their 
paying a heavy toll out of their meager receipts. 

The passage of the parcel-post act and its introduction on the short lines 
January 1, without making any provision whatever for the service, is a pro¬ 
ceeding that is open to the most severe criticism. Here we have an entirely 
new class of mail matter not contemplated nor provided for by contract or 
agreement thrust upon the roads with little opportunity to prepare for the 
service and no pay provided to pay for the same. Generous preparations seem 
to have been made for increased postal employees, wagons, automobiles, addi¬ 
tional post-office rooms, etc.; in short, everybody and everything is taken into 
account except the railroads, the cornerstone of the entire business combination. 

The competent, reliable, and safe builder in the common everyday walks of 
business life shores up and strengthens the weak parts of the superstructure 
before adding weight upon the foundation. But those in charge of the new and 
sensitive business recently evolved to undertake a great business venture are 
now “ window dressing ” to attract the crowd to their top-heavy structure with¬ 
out giving any thought or attention to the foundation. 

It certainly surpasses belief that any unfair bureau regulation in this or 
any other postal direction inflicted upon our short-line railroads will be toler¬ 
ated by our Representatives in Congress, when the facts as they exist are 
brought to light and made plain. In the parcel-post matter an immediate 
weighing of all parcel-post mail should be ordered on our railroads, and this 
mail when weighed should be properly classified and paid for in a just and 
equitable way to all concerned from the beginning of the service, January 1. 

Further, tlie unjust discrimination practiced against the short lines in apart¬ 
ment-car space, side and terminal deliveries, annual weighings, etc., should 
be promptly remedied by amending the postal law in conformity with H. R. 
4044, introduced by Representative Talbott. 

Overzealous employees of the Government, like overzealous employees of 
corporations, unthinkingly bring into disrepute the very interests they are 
selected to serve under the mistaken idea that the exercise of authority tempo¬ 
rarily invested in them is to be used in one direction, forgetting that there are- 
two interests instead of one to take into account, each of which is entitled 
to equal consideration. 

To guard against the abuse and misuse of power, as a matter of public duty, 
our legislators should hesitate in taking the risk of delegating their power and 
authority as representatives of the people to any department or bureau of the 
Government. 

Respectfully, 

Short Line Railroad Association, 
By John X. Drake, 

Secretary and Treasurer. 


REPLIES OF RAILROADS. 

Below are given the replies received from all railroads, arranged 
in alphabetical order, to the inquiries propounded in my circular 
letter of September 11, with the exception of those railroads already 


28 


RAILWAY MAIL PAY. 


indicated indorsing without further comment the reply of the 
committee on railway mail pay: 

The Ann Arbor Railroad Co. and Steamship Lines, 

Toledo, Ohio, October 1, 1012. 

Hon. Jonathan Bourne. 

Washington, D. C. 

Dear Sir : Your letter of September 11, addressed to Mr. S. Hendrie, president 
of the Manistique & Lake Superior Railroad Co., in regard to Senate bill No. 
7371, lias been referred by Mr. Hendrie to me for attention. 

In your letter you ask for an expression of opinion upon the following 
questions: •' 

(1) Do you deem tlie present plan of compensation an equitable one as 
between the Government and the railroads? If not, in what respects and as 
to what classes of railroads is it inequitable? 

(2) Is the underlying principle of the plan embodied in the inclosed bill a 
proper basis for compensation? If not, wherein is it improper, and why? 

(3) What, in your opinion, is a desirable plan for compensating railroad com¬ 
panies for transporting the mails? 

It is difficult to give offhand an answer to these questions. While the present 
plan of compensation for mail service may be improved upon, it is certainly a 
much more equitable one than the one proposed in Senate bill No. 7371. Under 
the present plan, the mails are weighed once every four years, and the com¬ 
pensation fixed by that weighing is the compensation to he paid the railroad 
companies during the ensuing four years, and no allowance is made for the in¬ 
creased service required from year to year, until the quadrennial weighing is 
made. This plan results in the railroads getting a much lower average rate 
per year for the service performed than they would receive if the weighing 
was equalized, or if it was made annually. To illustrate: A rate of pay may 
be fixed by weighing on railroad A for the period of four years, which we will 
say will average $200 per mile. Four years from now the weight is again 
taken, and it is found that the increase in mails carried has raised the rate 
to $300 per mile. As this increase has, in all probability, been gradaul during 
the four years, the average rate per mile during the four years should have been 
$250, whereas the rate paid has been $200 for the whole four years. This is 
not fair nor equitable to the railroad companies. 

In regard to the second question, the principle of the plan embodied in Senate 
bill 7371 is absolutely wrong and unfair to the railroad companies in that 
it places within the absolute control of the Postmaster. General the power to 
fix the rates of compensation which he shall pay to the railroad companies for 
performing services for the Post Office Department. In other words, the 
principle is that the purchaser of anything should have the right to say what 
he shall pay for it. In no other business, whether transportation, commercial, 
industrial, or professional, is this principle adopted. This plan would permit 
the Postmaster General to fix the price on any railroad and would give him 
the power to favor one line as against another, to reduce the price paid for 
service to an amount less than the actual cost of the service, because he is 
also to fix the cost. Even if the principle of having the Postmaster General 
fix the price to be paid by first ascertaining if the cost were equitable, the 
proposition that the compensation shall be “not exceeding the cost to the 
railroad companies of carrying the mails as ascertained by him and 6 per cent 
•of such cost added thereto,” would be grossly unfair to the railroad companies. 

The bill reads that “the Postmaster General shall determine the cost to each 
railroad company of carrying the mails on its route or routes.” I assume that 
this means the actual cost of performing the service and does not include any 
allowance for use of tracks, trains, stations, and the general plant of the rail¬ 
road company. The average cost of operating the railroads and performing the 
service necessary for the transportation of freight, passengers, mail, and ex¬ 
press is about 66 per cent of the gross revenue received. The remaining 34 
per cent is required to pay taxes, interest on bonds, and out of the remainder 
such dividends to the stockholders as the balance may justify. We, therefore, 
estimate that it requires at least 50 per cent of the cost of performing service 
to pay fixed charges and a reasonable interest on the cost of the property 
and equipment used in performing the service. Therefore, the proposed 6 per 
cent to be added to the cost of performing the service of carrying the mails 


RAILWAY MAIL PAY. 


29 


would not be one-fifth of the interest charge on the property used in perform¬ 
ing such service. The Government would, therefore, he receiving at least 25 
per cent of the actual cost of performing the service without compensation. 

the proposed hill also puts in the power of the Postmaster General the plac¬ 
ing of tines on the railroad companies for all manner of things, and leaves it 
absolutely in his power, without any right of appeal, to fine as he pleases. 

lhe whole hill is what is called a “jug-handled arrangement'* and the Post¬ 
master General will hold the handle. 

In answer to the third question, “ What is a desirable plan for compensating 
railroad companies for transportation of the mails”? I have only one opinion—- 
and that is, that any plan which is fair and equitable and gives a fair consider¬ 
ation for the service rendered with such a reasonable amount of profit as is 
contemplated by law would he a desirable plan. If the Postmaster General and 
the railroads can not agree on what is fair compensation, then I would suggest 
a commission of fair-minded and disinterested men to decide what would be 
fair compensation. 

Yours, very truly, J. Ramsey, Jr. 


The Baltimore & Ohio Railroad Co., 

Baltimore, .1/(7., October 25, 1912. 

lion. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir: This will acknowledge receipt of your communication of the 
11th ultimo, with respect to the consideration to he given by a joint committee 
of Congress to the question of compensation to he paid to railroad companies for 
the transportation of the mails. 

Replying to the inquiries you submit: 

Question 1. Do you deem the present plan of compensation an equitable one 
as between the Government and the railroads? 

Answer. By the present plan we assume you refer to the practice of paying 
by weight, plus allowances for cars used in the Railway Postal Service and for 
special terminal and other minor services. Our view is that this plan of com¬ 
pensation can be applied so as to he equitable alike to the Government and to 
the railroads, and is correct in principle in that it recognizes and compensates 
for special facilities furnished as well as for the quantity of mail carried. 

Under the present application of the plan, however, there appear to he nu¬ 
merous inequities to the railroads in that: 

(a) Through the practice of quadrennial weighings the railroad companies 
are compensated for carrying the mail on the weight ascertained at the be¬ 
ginning of a four-year period, and therefore carry the natural growth of mail 
in a given territory during the succeeding four years without compensation ; 
consequently they are performing a constantly increasing service without re¬ 
muneration*. 

(7>) In ascertaining the daily average weight of mail it is believed that the 
present practice, dating from the act of Congress of March 2, 1907. supple-, 
mented by order No. 412 of the Postmaster General changing the divisor, is 
npt equitable, in that the railroads giving the greater measure of service for a 
given quantity of mail carried receive the lesser compensation. 

(c) While provision has been made for compensation where full postal cars 
are used, where compartment cars are used the railroads are called upon to 
furnish a large amount of car-foot space for Railway Mail Service without 
compensation therefor. 

(d) As a rule the provision for terminal service is inadequate, while for 
“side messenger service” no compensation is provided. 

With the correction of these details, it is believed that the general provisions 
of the present law will be found to be equitable alike to the Government and to 
the railroads. 

Question 2. Is the underlying principle of the plan embodied in suggested bill 
7371 a proper basis for compensation? 

Answer. We understand that the purport of this bill is to apply a plan of 
compensation based upon operating costs and taxes apportioned on car-foot 
space as occupied by the respective classes of passenger-train traffic. A basis 
of compensation oil car-foot space properly apportioned might be equitable, 



30 


RAILWAY MAIL PAY. 


provided cost accounting could be developed to a point of sufficient accuracy, and 
provided such accounting recognized and embraced all elements of cost. The 
plan proposed in Senate bill 7371, however, is not based upon an accepted 
basis of cost accounting, and is believed to be fundamentally wrong in that it 
does not recognize and provide a fair return upon the proportion of capital 
employed in the enterprise—in fact, provide for no return whatever upon capital 
account.. 

Question 3. What, in your opinion, is a desirable plan for compensating rail¬ 
road companies for transporting the mails? 

Answer. As indicated above, we feel that with certain modifications the plan 
that has been in operation for a number of years past can be adjusted and 
operated so as to be fair and equitable to the Government and to the carriers 
alike. 

It is recognized, however, chat this is a very important subject, bearing on the 
different classes of service and the different sections of the country in various 
ways, and therefore the railways’ members of the American Railway Associa¬ 
tion have appointed a committee on railway mail pay, which for several months 
has been giving consideration to the subject of mail compensation. We have 
noted the communication of the acting chairman of this committee, addressed 
to you under date of October 3, and concur in the position taken by the com¬ 
mittee in its response to your inquiries. We feel that this committee will be in 
position from time to time to give you further full and accurate information on 
many points bearing on this subject, and to make more valuable suggestions in 
line with your inquiry than a single railroad could possibly do. 

Under recent laws additional burdens have been placed upon the railroad 
companies afid particularly in the way of requirements for steel postal cars, 
and through department orders similar requirements have been made to cover 
mail apartment cars, these cars being in substitution for cars previously con¬ 
structed on plans approved by the postal authorities. We do not criticize the 
general desire under changed conditions for stronger and better cars in railway 
postal service, but such changes do require the abandonment of equipment here¬ 
tofore considered adequate, and the substitution of new equipment. All of 
these changes involve increased cost to the railroads and the expenditure of 
additional capital. Notwithstanding this, and in the face of an increased 
amount of mail carried, the compensation for railway mail service has been 
seriously decreased, thus encroaching on the net revenues of the companies, 
which should be augmented rather than decreased if the railroad credits are 
to be upheld on a basis to maintain the roads in a position to extend both the 
amount and character of service necessary to meet the growing public require¬ 
ments. 

We appreciate the evident desire of your committee to determine this question 
on a basis equitable alike to the Government and to the railways, and I am 
sure the railways generally will gladly cooperate with your committee in its 
endeavor to arrive at a conclusion. 

Very respectfully, D. .Willard. 


Bangor & Aroostook Railroad Co., 

Bangor, Me., September 25, 1912 . • 
Hon. Jonathan Bourne, Jr., Washington, D. C. 

Dear Sir: To your inquiries of September 11 I beg to say: 

(1) I do not deem the result obtained for the Bangor & Aroostook Railroad 
Co. under “ the present plan of compensation ” an equitable one. Its operation 
is, in my opinion, inequitable because Federal procedure is often arbitrary and 
because the practical and the responsible are too much subordinated to the 
opposite. 

(2) In my opinion “the underlying principle” is not “a proper one,” in 
that no one person, however able, or however conscientious, can acquire knowledge 
of all of the direct and incidental cost which is imposed upon, and which each 
railroad company imposes upon itself in movng the mails. (Desire to well serve 
patrons often results in contribution of service which costs many times more 
than the governmental allowance in return.) Experience has taught that a 
Federal officer who has been to pains to investigate specific service, and 
inadequacy of compensation, may resign, or be displaced, before an equitable 
adjustment is possible. 



RAILWAY MAIL PAY. 


31 


(3) My opinion is that a competent representative of the Post Office Depart¬ 
ment should join a competent representative of each railroad company in an 
inspection of the service which is performed on every section of road over' 
which mail is transported, and that the same standards should be applied be¬ 
tween Post Office Department and railroads as it is intended to have applied 
between other purchasers of transportation and the railroads per interstate 
commerce and other relevant laws. 

Yours, truly, F. W. Cram, President. 


Bessemer & Lake Erie Railroad Co., 

Pittsburgh, Pa., October l! t , 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: I duly received your letter of September 11, with copy of Senate 
bill No. 7371. asking for replies to certain interrogatories. 

The committee on railway-mail pay of the American Railway Association 
has submitted a reply to your letter, a copy of which has been furnished to us. 
which we fully indorse and agree to the position taken by that committee. 

We would further state, however, that as far as the Bessemer & Lake Erie 
Railroad Co. is concerned, the compensation should be on a remunerative basis 
for the investment in especially fitted cars and facilities provided, and, in 
addition, that the railroad should also receive revenue on a more equitable 
basis for tonnage handled. 

The fact is that the usual weighing period has been in the spring of the 
year, when business is lightest, and no consideration is given for the heavier 
tonnage during the balance of the year, nor are the railroad companies allowed, 
as they should be, compensation based upon the cost of the service and equip¬ 
ment, with a reasonable profit. 

The bill as presented by you provides that “ the Postmaster General shall 
determine the cost to each railroad company of carrying the mails on its re¬ 
spective road or roads, and shall verify and state the result in such form and 
manner as he shall deem proper.” This puts more power in the hands of the 
Postmaster General than heretofore enjoyed by him, and those who have had 
experience know that the power has already been exercised to its limit. 

The further clause that if the railways disagree with the conclusion of the 
Postmaster General, either as to form, significance, or assignment, the matter 
shall be referred on appeal to the Interstate Commerce Commission. The 
Interstate Commerce Commission long ago despaired of applying a rational 
basis of apportionment of operating expenses as between passenger and freight 
traffic. We think the burden imposed upon the Interstate Commerce Commis¬ 
sion by such appeals would be a source of annoyance not only to the commis¬ 
sion but to the railroads, as the determination of the appeal would involve a 
study of each road’s conditions, varying to a great extent from year to year. 

We have had an experience with the Post Office Department in regard to the 
matter of compensation and have found that the arbitrary methods pursued 
by this department are one-sided to the extreme. There is no chance for reach¬ 
ing the Postmaster General with an appeal beyond the Second Assistant Post¬ 
master General, the latter’s stereotyped reply being that the matter has been 
passed upon by the Postmaster General, and that seems to be the end of the 
matter as far as the department is concerned. We took exception to their 
method of computing compensation for the present four years as against the 
previous four years, and showed by facts and figures that our compensation 
was $900 less on the present basis and that we handled on an average for the 
90 days’ weighing period 5,392 pounds, as against 4,747 pounds, on which the 
former basis was arrived at. Their method of computation was based on a 
divisor of seven, used arbitrarily for all roads in our class, yet we handled 
no mail on Sunday and were entitled to a divisor of six, which would have 
given us a better revenue and which we were entitled to. This was brushed 
aside with the statement that “ their method of ascertaining the average daily 
weight has become an established rule and has been applied to all service 
without exception since the promulgation of the order covering the service of 
all States except those embraced in the fourth contract section (Western 
States), which would be weighing the following spring, and to which it will 
then be applied.” That settled the whole proposition as far as the Post Office 



32 


RAILWAY MAIL PAY. 


Department was concerned, and there was nothing for ns to do but to submit. 
We submitted, but brought suit against the Government of the United States 
for what we felt we were entitled to, and the matter is now pending in the 
Court of Claims (No. 31230). 

•Respectfully, E. PI. Utley, General Manager . 


Bellefonte Central Railroad Co., 

Philadelphia, October 9, 1912. 

lion. Jonathan Bourne, Jr., 

Washington, D. G. 

My Dear Sir: Your polite favor of September 11. concerning Senate bill 
7371, was duly received. In replying I shall endeavor to give such available 
figures as seem to substantiate my views. 

1. The present system of fixing mail pay, if amended as proposed in House bill 
4044, would be equitable and satisfactory. 

2. Senate bill 7371 appears to me to be crude and indifferent to the rights of 
the railways, as for example: 

Cost plus 6 per cent .—To the casual observer the cost of service plus 0 per 
cents seems to he a sufficient compensation. I shall try to show that this is not 
the case, and that we have just grounds for complaining of the new plan. 

I am, of course, writing from the standpoint of the short lines, which num¬ 
ber in this State alone, according to the report of the Bureau of Railways of 
Pennsylvania for the year ending June 30, 1911, pages XYII-XX, 132 roads, with 
a total mileage in the State of 3,040 miles. 

Operations for the year were as follows: 

Gross earnings from operation, $12,115,694, or $3,985 per mile; operating 
expenses, $8,332,971, or 68.7 per cent of the gross; other expenses, taxes, 
interest, and renewals, $3,006,650, or 20.5 per cent of the gross; total dividends 
paid, $750,978, averaging 1.13 per cent on a stock capital of $21,720 per mile. 

The average ratio of operating expenses to gross earnings from opera¬ 
tion of all the roads in the State is 70.5 per cent, and 70 per* cent is the average 
of all the roads of this country with annual operating revenues of $1,000,000 
or more. 

If we take 70 per cent as a fair estimate of the proper figure, a little thought 
will show that it will require the operating expenses with 40 per cent of the 
operating expenses added to equal the average operating revenue earned at 
present and needed to properly conduct the roads. 

Evidently, since it took the cost of operation with 40 per cent of the cost 
added to enable the short lines of Pennsylvania to pay dividends of 1| per cent 
upon a reasonable capitalization, the cost plus 6 per cent of the cost is insuffi¬ 
cient compensation. 

Fair and equitable cost .—We anticipate, from House Document 105, that if 
the Postmaster General be permitted, under the vague provision of this bill, 
to “ determine the cost of carrying the mails in such manner as he shall deem 
fair and equitable,” we should be much worse off than we are at present, Refer¬ 
ring to pages 272-273 of Document 105: 

The department allowed us at the rate of $3,260.92 car-l'eet miles per annum; 
we claim $8,100 car-feet, miles per annum. 

The department estimated the cost to us at $592.32 per annum ; we claimed 
a cost of $2,469 per annum.' 

The department estimated our profit at $575.40 per annum; we asserted a 
loss of $1,521 per annum. 

The roads complain very generally of the way in which their figures have 
been employed in the preparation of the document. The calculations seem to 
he based upon a rule which the department has laid down that 6 linear inches 
shall be allowed for 100 pounds of mail, 10 inches for 200 pounds, and 5 inches 
for each 100 pounds over 200 pounds. 

When a car is filled to the roof with mail matter this may be correct; I do 
not know; but it is not correct for a closed-pouch service like ours, where the 
amount of mail varies from 1 bag to 40 bugs, where the larger amount must 
he provided for, and where this small number can not be compressed into the 
same proportionate space as if the car was full of mail. 

I hold, therefore, that the “car-space-used” basis of estimating for a closed- 
pouch service is inapplicable to conditions, and that neither the amount of the 
compensation proposed nor the manner of ascertaining it is safe or satisfactory. 



EAT [.WAY MAIL PAY. 


33 


For tlie year ending June 30, 1012, a careful estimate of the cost to us of 
conducting the mail service, counting in operating expenses, depreciation, and 
taxes, is as follows: 

Cost of service_$2,474.46 

Mail revenue_$1,167.67 

Less deliveries_ 220.00 

- 047.07 


Net loss- 1, 526. 79 

Deliveries .—We do not consider the cost of deliveries—$220, as above—to be 
an operating expense. It is not railway service of any sort. We have to let the 
work to outside parties, and the pay they receive is simply a deduction from 
our mail pay. 

This bill proposes that the roads shall provide side, terminal, and direct 
transfer service. In my opinion it would be better and cheaper, at such small 
places as are usually served by the short lines, if the duty of collecting and 
delivering the mails were assigned to the local postmasters. They should per¬ 
form it with little, if any, increase of compensation. The railway employees 
can not do it, as they are fully occupied at the times of arrival or departure of 
trains in selling tickets or handling freight, and for this reason we have to con¬ 
tract for the work at the rate of $48S per mile, being paid ourselves at the rail¬ 
way rate of $59.85 per mile. 

House bill 4044 proposes to relieve the railways of side and terminal deliveries. 

The Senate bill provides that the railways must accept the compensation 
offered or suffer heavy penalties, confiscatory penalties. I do not suppose that 
this probably unconstitutional provision will be seriously considered by Congress. 

3. As to offering a suggestion for a desirable plan of compensation, I would 
say that House bill 4044 appears to me to meet the requirements very well. If 
tins can not be accepted, I would renew a suggestion that I made some years 
ago to the effect that the mail should be weighed for every train and settled for 
under a tariff proportionate to other tariffs and subject to regulation. I can 
see no objection to this plan. 

In House document 105 I find the names of only about 12 of the 132 short 
lines of this State. Perhaps the short lines did not respond very generally to 
the request to report upon their mail service. If so, it is to be regretted, as 
the framers of the bill seem to be unfamiliar with the conditions existing upon 
the short lines, or have at least not taken them sufficiently into account in draw¬ 
ing it up. 

It seems to me that in this and in all railway legislaion it would be just and 
conducive to the intended reforms that some classification of the railways 
should be adopted, either according to their mileage or by their gross earnings, 
as already prevails in some of our States. 

The more we study the subject the more plainly it appears that laws which 
are applicable to trunk lines and proper in their cases may easily be ruinous to 
the short lines. 

Such unintentional and oppressive results ought to be looked out for and 
avoided wherever possible. 

With much respect, I remain, 

Very truly, yours, Robert Frazer, President. 


I »o yne City, Gaylord & Alpena Railroad Co., 

Boyne City, Mich., October 2 , li)12. 

Jonathan Bourne, Jr., 

Washington , l). C. 

Hear Sir: Your letter of September 11 to Mr. W. II. White, inclosing Senate 
bill No. 7371, is received and noted. 

We do not think your bill would be a desirable one to pass. In the first place, 
we think you are figuring on a wrong basis to be fair with the railroad com¬ 
panies. Second, we think you would get into a very complicated controversy as 
to the compensation that should be paid to the railroad company. There are 
very many different conditions existing over the country and we think you will 
have to figure out some different plan. On a short road, such as we operate, no 


74972—33 











34 : 


RAILWAY MAIL PAY. 


special equipment is provided for carrying the mails. It is carried along with 
the express and only requires a small amount of space. We think it is not fair 
to railroad construction to hold the actual earnings down to a 6-per cent basis. 
If it were not for the railroads the country would not be what it is, and you 
people in Washington should he figuring to give them a fair deal rather than to 
see how close you can figure all the time. 

Yours, very truly, W. L Martin, Secretary. 


Boston, 


Hon. Jonathan Bourne, Jr., 

Washington, I). C. 


Revere Beach & Lynn Railroad, 

Boston, September 16, 1012. 


Dear Sir: Yours of the 11th instant, inclosing Senate bill 7371, has been 


received. 

In reply, I will say that this company carries mail to two small towns adjoin¬ 
ing Boston. The amount of compensation is so small that I prefer not to 
express an opinion in regard to the matter. 

Yours, very truly, 

John A. Ff.nno, Superintendent. 


Buffalo, Rochester & Pittsburgh Railway Co., 

Rochester, Y. Y., November 1, 1012. 

Hon. Jonathan Bourne, Jr., 

Washington, /). G. 

Dear Sir: Replying to your letter of September 11. propounding three ques¬ 
tions in relation to mail pay: 

Question 1. I)o you deem the present plan of compensation an equitable one 
as between the Government and the railroads? 

Answer. We do not deem equitable the plan outlined in Senate bill 7371, but 
do believe that House bill 4044, introduced by Mr. Talbott on April 11, 1911, is 
more equitable to both the United States and this railroad. This bill in short 
provides (a) for a flat rate of $75 per mile per year for carrying mail not to 
exceed 500 pounds in weight per day; (&) annual weighing, thus giving (c) 
relief to railroads from delivering mails at points beyond their stations; (d) 
provides that space in apartment cars used for post-office purposes shall be 
paid for at a pro rata rate of the rate now paid for cars 40 feet in length. 

Question 2. Is the underlying principle of the plan embodied in Senate bill 
7371 a proper basis for compensation? 

Answer. The underlying principle of the plan embodied in Senate bill 7371 is 
not correct. Any plan for compensation based upon operating cost plus 6 per 
cent as a maximum for profit is fundamentally wrong. Furthermore, it gives 
to the Postmaster General the power to ascertain by his own method the cost 
to a railroad of conducting its business, and such arbitrary method, in our 
opinion, is wholly impracticable and would prove disastrous in most, if not all, 
lines of trade. Moreover, this bill does not require the Postmaster General to 
pay to the railroad its cost of conducting mail transportation plus 6 per cent, 
but such authorized payment describes that such cost (ascertained by him) 
plus 6 per cent is a maximum beyond which he may not go, and such amount 
that he shall pay is left wholly to his discretion. There further appears to be 
no method of appeal by the railroad other than that matters bearing upon the 
question of what the Postmaster General shall and does pay may be referred to 
the commission, but does not give the railroads an opportunity to be heard by 
that commission, and should the railroad feel that the compensation is not just, 
may not refuse to handle mail (at a loss) without committing an unlawful act 
and making itself liable to a fine for so doing. 

Question 3. What, in your opinion, is a desirable plan for compensating rail¬ 
road companies for transportation of mails? 

Answer. As stated in answer to question No. 1, House bill No. 4044, intro¬ 
duced by Mr. Talbott, of Maryland, on April 11, 1011, amending the present law, 
seems to meet present-day conditions much more satisfactorily in so far as it 
proposes: Annual weighing of mails, thus giving to the carriers the benefits of 
the natural increase in weight of mail each year; proper payment for space 
used in apartment cars assigned to R. P. O. service, based on the pro rata that 




KAILWAY MAIL PAY. 


35 


(<u space used bears to a car 40 feet in length, as is provided for; relief from 
ieiinin.il and side-line delivery; establishes a minimum of $75 for routes carry¬ 
ing less than 500 pounds per day. 

Be.uing in.mind that it is the intent of the United States to deal fairly with 
the carriers, it appears to me that this bill falls into class legislation in so far as 
the United States would assume the position of a favorite shipper. The under¬ 
lying principle of the interstate-commerce law is equality among shippers and 
to pieient discrimination. 1 he bill as introduced permits of discrimination at 
the discretion ot the Postmaster General, in whom is conferred the right to 
decide what the rate of compensation to a carrier shall be, and empowers him 
to arbitrarily order the carrier to perform a service whether it be at a profit or 
at a loss. 

5 ours, truly, H. E. Huntington, 

General Passenger Agent. 


Carolina A Northwestern Railway Co., 

Chester , S. C., October 8, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: I have been furnished with a copy of reply forwarded by the 
eommitte on railway mail pay, and fully indorse the position taken by that 
committee, with the further expression of views on the subject: 

Question 3. (A) Weigh 30 days in each year. 

(B) Divide by six days (and not penalize the line that gives seven-day 
service). 

(C) Pay on present basis for hauling. 

(D) Either pay a fair passenger rate per mile for post-office clerks and other 
employees, or relieve the railroads from all personal-injury claims on their 
account. 

(E) Believe lines of terminal or side-line deliveries, else pay for them. 

(F) In addition to the rate paid for actual haulage, allow for compensation 
for all car space exclusively used by the Post Office Department. 

(G) Would further ask you to consider the fact that the rate basis for 
carrying the mails was established at a time when there were no mail cars, 
clerks, or carriers, and the railroads carried the mail bags in their baggage 
cars and dropped them off, as per tags. The weight basis is the correct basis 
for that service, but when postal clerks were added and post offices on wheels 
demanded and required to be attended to better than the parlor-car service on 
the lines on which they run, it goes without fear of contradiction that the 
roads should have pay for each service separately. 

And further, there is no justification from any business standpoint in only 
considering cost of service and not include fixed charges, which must be incurred 
before the service can be performed. It reminds me of the merchant who pur¬ 
chased a fine store, put in a large stock of goods and sold them on basis 
of cost of clerk hire, without considering the value of the goods or plant. 
Absurd, you say, and I agree with you, but that is an exact parallel to the 
basis of pay proposed in bill No. 7371. 

Yours, very truly, L. T. Nichols, 

General Manager. 


Central Railway Co. of Arkansas, 
Plainview, Ark., September 17, 1912. 


Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: We have your favor of the 11th. We do not operate extensively 
enough to give you an opinion of what you require. As far as we are personally 
concerned, the present laws are satisfactory to us for handling the mails. If 
we had a more extensive railway it would probably be different. 


We trust this information will 
Yours, truly, 


answer your purpose. We are, 

Central Railway Co. of Arkansas, 
By C. W. Jones, General Manager. 




36 


RAILWAY'MAIL PAY. 


Charleston & Western Carolina Railway Co., 

Avgusta, On., September 25, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Replying to your circular letter of September 11 inviting answers 
to certain questions concerning the compensation now paid railroads and pro¬ 
posed compensation as set forth in Senate bill 7371. 

Answering your first question: I do not regard the present plan of compen¬ 
sation an equitable one as between the Government and the railroad that I 
represent, for the reason that we are not paid for the apartment cars, while 
full-length cars are paid for, and, further, because the rate paid is far less 
than the actual cost as evidenced by certain statistical information which you 
will find contained in a brief which I submitted to the Committee on the Post 
Office and Post Roads of the House of Representatives, a copy of which brief 
l herewith inclose, since which time, by the way, our mail-car mileage has 
been largely increased, thus reducing our revenues per apartment car-mile to 
about 5 cents. 

Second. I do not think that the plan embodied in the proposed Senate bill 
a proper basis for compensation, but I will not attempt at this time to discuss it. 

Third. I am rather inclined to believe that the present plan as a basis is 
probably about as good a one as we will be able to arrive at. with the additional 
feature that all mail-car space should be paid for and not confine it to full- 
length cars only, and thus discriminating in favor of the heavy mail routes 
when as a matter of fact the weaker lines should be protected in every way 
possible. Further, that the mail should be weighed at least annually or else 
i hat an adjustment be made following the weighing after four years, based 
upon an increase for the average time. 

Yours, very truly, A. W. Anderson, 

General Manager. 

K 

Charleston & Western Carolina Railway Co., 

Augusta, Ga., December 15, 1910. 

Hon. John AY. Weeks, Washington, D. C. 

My Dear Sir: When we were given a hearing by your committee on June 14 
last you laid down the proposition, by inference if not in words, that if the 
railroads of the country handled any business without profit on passenger 
trains through a voluntary arrangement it was reasonable that we should be 
required to carry the United States mails at an unprofitable rate whether we 
wished to do so or not. 

It appears, therefore, Mr. Chairman and gentlemen, that we must uot only 
show this committee that the rates paid us for carrying the mails are unprofita¬ 
ble, but we must also show why express rates are as low and in some cases 
possibly lower, and why there can be no comparison between the two, and why, 
even if so alike as to warrant comparison, the pay should not necessarily be 
the same. 

No one thing, possibly, has done more to.develop this great country of ours in 
the past than the liberal treatment given the railroads. It may be true that in 
some instances high rates have been charged, but it unquestionably is also true 
that the right to conduct their business in their own way has made possible 
the construction of many roads that, under conditions existing at this time, 
would never have been constructed, among others, the railroad I represent; 
and although some portions of it were completed nearly 40 years ago, and all of 
it over 25, it has not yet reached a point where it could pay even a low rate 
of interest to its owners. All earnings in excess of interest on a low bonded 
indebtedness have been devoted to improving the property in an effort to make 
ir valuable, not alone to its stockholders but also to the section through which 
it runs. 

Some of our rates per ton per mile seem high; others so low as to make it 
questionable whether profitable. The passenger rates are the same as apply 
on other lines. AVhat I have said of our line can be said of many others 
throughout our section. 

No matter what the conditions are or how many tons per train-mile can be 
hauled, no railroad could live and charge on all of its business what it earns 
per ton per mile on its lowest class of traffic. Therefore rates must vary, not 
alone because the articles hauled may differ, nor on account of the care that 



RAILWAY MAIL PAY. 


37 


must be cxeicised in the handling of one as compared to tlie other, but they 
must differ for still another reason that is recognized as perfectly sound, and 
that is that one class of traffic can afford to pay a higher rate than another, 
though similar in many respects; another thing always considered is volume; 
still another, value. 

To Properly develop a business it has been a well-known practice, and one 
that I think is beyond criticism, to charge rates that will enable the business to 
develop. 

Fast service, safe service, and frequent service are of much more importance 
to the individual than the mere question of whether he pays a few cents more 
or less per hundred on freight that he may ship, and nothing is so much 
deplored from a standpoint of progress and development as the attitude dis¬ 
played, not alone by the public, and largely by them through a real misconception 
of the facts, but by the Government itself, as evidenced by the utterly inade¬ 
quate pay fixed by Congress for carrying the mails. I say “ fixed ” advisedly; 
for while we could no doubt sustain in the courts a refusal to perform the 
service at the rates paid, public sentiment and our wish to do our full duty to 
our patrons has led us to perform the service at such rates as you fix and 
under such regulations as the department has laid down. 

Notwithstanding the fact that we are spending considerably more money in 
the maintenance and operation of our property than we earned 10 years ago, 
we are actually being paid a total of less for carrying the mails now than we 
were paid 10 years ago, though we are handling, of course, more mail and are 
performing 50 per cent more mail car miles. 

Please note the following actual figures: 

Total mail pay, 1900-1901_$23. 489. 73 

Total mail pay, 1909-10_ 22,930.90 

Decrease- 558.83 or 2.38 percent. 

Total mail car miles, 1900-1901_ 252,748 

Total mail car miles, 1909-10_ 378,177 

Increase_ 125,429 or 49.82 percent. 

Cents. 

Rate paid per mail car mile, 1900-1901 _ 9.3 

Rate paid per mail car mile, 1909-10_ 6. 1 

These figures are exclusive of pouch routes, nor do they take into considera¬ 
tion the cost of handling to and from post offices, which, if included, would still 
further reduce our earnings per car mile. 

Assuming that there had been no increase in the weight carried and that we 
were being paid only the increase we were entitled to (if there had been no 
change in the rates paid us) on account of increased cost of doing business, we 
would have been paid about 12 cents per mail car mile instead of 0.1 cents. 

Deducting alone the cost of handling the mails to and from post offices, which 
work we also do. it would reduce our net earnings for the handling of 378.177 
mail car miles and the pouch routes to $19,795.00, or to 5.2 cents per mail car 
mile. 

We have been asked to say what a reasonable compensation would be. To 
answer this question in a word and without giving my reasons and some facts 
and figures would, I believe, be unsatisfactory to your committee. I will 
undertake, therefore, to give you some figures by which you can arrive at what 
I tli nk should be at least our minimum pay per mail car mile. 

We have never regarded our passenger business as a profitable one, as you 
will understand from the following figures: 

During the past year our passenger service revenue per train-mile was 74.IS 
cents. Our operating expenses per train-mile amounted to $1.22. Last year 
our average passenger train revenue per car mile, including Pullman cars, 
coaches, baggage cars, mail cars, and express cars, was 26.23 cents per mile, 
and vet our mail, which practically occupies the half of one car. paid us only 
6.1 cents per car mile, or less than one-half, approximately, of what the average 
car in ous passenger trains earned, and that, too, notwithstanding there was but 
little, if any, profit from our passenger trains. 

Our cheapest service is supposed to be our freight-train service. It is cheap¬ 
est because of the large volume that can be handled in the most inexpensive 
wav. It is because the facilities and men engaged cost less per dollar earned 














38 


RAILWAY MAIL PAY. 


tlmn in the passenger service. It is because the original cost of freight cars, 
and. as well, the maintenance, is hardly one-tentli the cost of passenger cars, 
and it is also because we do not have to furnish, in many other respects, the 
same expensive service that is required by passengers. 

I am sure it will be admitted by this committee that if the vast majority of 
our railroads failed to make something on their freight business they would 
fad to pay expenses, and that if we use our cheapest service as a comparison 
we go very much further than we ought to go in demonstrating the inade¬ 
quate pay allowed us for handling the United States mails. 

We averaged last year earning 17 cents per car mile for every freight car, 
whether loaded or empty, handled on our line, and yet we only earned 6.1 cents 
per mail car mile, not including, mind you, the handling of mail to and from 
post offices; nor does this include 72,610 pouch route miles. 

We have very recently, at the request of the department, put on additional 
mail-car service that will add 22,536 miles and reduce our revenue per mile still 
further—from 6.1 cents to 5.7 cents. Please bear in mind that this additional 
service will have to be performed for some two years longer without one dollar’s 
additional pay. We have also been asked by the department for other mail-car 
service, which will add 43,800 more miles, without pay, or a total of 66,336 
additional miles. This largely increasing our already nonprofitable work re¬ 
minds me of the story of the merchant who. when asked how he managed to 
sell his clothing below cost, as he claimed to do, gave as his explanation that he 
sold so much of it. 

Possibly the Post Office Department has Ibis in mind when they add 66,336 
more mail car miles to the service we are already performing at a loss. Could 
anything be less reasonable and more unfair? 

The space set aside in our apartment cars for mail service averages about 
102 square feet per car, while our freight-car average is about 306 square feet 
per car. We therefore find that had our mail-car service paid the same rate 
per square foot per mile that our freight-car service paid, we would have earned 
10.7 cents per mail car mile, instead of 6.1 cents, or $40,464.94 instead of 
$22,930.90. our present mail pay. 

Is this statement of facts alone not sufficient to convince you how inade¬ 
quately we are paid? 

Compare the character of cars, the character of contents, including the Gov¬ 
ernment’s employee, who is in every sense regarded as a passenger, the fast 
service, the greater risks, and the extra delivery service at stations with the 
ordinary freight service, and surely it can not be questioned that the pay al¬ 
lowed us is absurdly low. 

We have been asked in what way our mail pay has been reduced and to what 
extent. Need 1 answer the question other than to refer to the fact that our 
total pay to-day is less than it was 10 years ago, though gross earnings of our 
road per mile have increased during that time fully 100 per cent, and our mail 
car miles have increased 50 per cent, and our gross operating expenses during 
this time have increased practically 100 per cent? 

If our rates had not been reduced and we had been paid in accord with the 
increased cost of doing business, not to mention the increased mail car miles, 
we would get to-day twice as much as we were paid 10 years ago. 

At the hearing before this committee in .Tune last I called attention to the pay 
of the rural delivery carrier as compared with the pay given the railroads. The 
rural carrier is given 12 cents per mile for handling a few pounds of mail. 
The public furnish the highway that he operates over and maintain it. It is 
optional with the carrier whether he rides or walks. If the former, it is 
through no greater necessity than because he prefers the ease rather than the 
saving of the cost involved in riding. The railroads maintain their own high¬ 
way, at a cost to them of, in many cases, one-fifth of their gross earnings 
They must furnish not only a conveyance for the transportation of the mail, 
but they must furnish an office on wheels for the use of the Government’s mes¬ 
senger, whom they must also transport free and must provide him with all of 
the comforts furnished other passengers. The one is paid 12 cents per mile; the 
other, at least our road, is paid 6 cents per mile. There must be some cause 
for so great a difference. Is it because the Government can not get its work 
performed by the individual if it paid even as low rates as it pays the railroads 
for 10, yes. 20, times the service? Surely the fact alone that the Government 
may force its regulations upon the one, while it must pay the other reasonable 
rates or else do without the service, is not the reason that we are being paid 
such unjust rates; rather, it should be a reason why the Government should 
see that we are properly paid. 


KAILWAY MAIL PAY. 


39 


Troiii the questions asked by your committee regarding our arrangement with 
the express company you seem to have in mind that our express earnings should 
be used as a basis to govern our mail pay. 

For the information of the committee I will slate that we have a contract 
with the Southern Express Co. Our contract, f suppose, is very similar to con¬ 
tracts in effect between other roads and the Southern Express Co. It provides 
that we should get (I haven't the exact figures before me) one-half of the 
express earnings for hauling the express. It also provides that the express 
company assumes all responsibility for personal injury and loss and damage 
claims, except charges on such perishable freight as may not move after having 
been receipted for. The express company must also furnish all employees neces¬ 
sary to handle the business where it originates, at its destination, and at trans¬ 
fer points en route. 

The contract also provides for certain responsible services to be performed 
for the railroad in the way of transporting money from the agencies collected 
to such points as may be designated; in fact, the arrangement, in a few words, 
is that the railroad company agrees simply to haul the business and the express 
company agrees to perform certain free service and to assume all risks and 
expenses, the proceeds to be divided between the two. 

Our experience has been that there was little or no profit in the express 
business to us, but it is so much a part of the railroad business that we do not 
feel that we can get away from it. 

Our express revenues in the past 10 years have varied from as low as 
$6,843.67 in 1900-1901 to $27,561.75 in 1906-7. I don't believe that the 
express company, so far as some of the worst years in the past 10 are con¬ 
cerned. have made a dollar, any more than we have, out of the business, and I 
have no doubt but that they would be willing, if they could do so, to go out of 
the business on our road just as readily as we would be willing to do so. 

The handling of mail and the handling of express is as different as two propo¬ 
sitions can be.' In carrying the mails we are performing a service without 
having the slightest interest in the revenues derived; the other is an arrange¬ 
ment in which we participate in the earnings upon an agreed basis that is as 
much to our advantage as it is to the express company, and worth nothing 
directly to either. 

1 was asked by a member of this committee in June last why we did not 
make a better arrangement with the express company and get more out of it. 

I believe that the facts stated above will answer that question; that is to say, 
we have made about the best trade we could expect to make, and one 
as good as the express company would make with us in view of the 
express earnings. 

feature of the agreement with the express company that I failed 
to mention is that the express company agree not to name a lower charge than 
would be agreeable to us. Our reason for this must be plain, and that is that 
we want the express rates maintained at such a standard as not to interfere 
with our freight business. Certainly, we do not want to encomage business 
to move by express that could move by freight when we get all of the revenue 
instead of dividing it with the express company. The theory is that we want 
onlv such high-class business as will stand much higher rates to be tendered 
the express company. If it is of such a character as can stand freight service, 

we want it to move by freight. , ., 

\ member of your committee at the June hearing Mr. Lowden. I belio\e it 
w as—asked me to be prepared to give this committee our line's proportion of 
the rate from Washington to Augusta, stating that the information would bear 
on the question under discussion, as it would show what we did when we made 
a voluntary agreement with the Atlantic Coast Line Railroad upon freight 
matter under a traffic agreement as compared with the involuntary arrangement 

with the Government. . , . , OK 

We are paid for handling the mail between Robbins and Augusta $o,).So per 

mile per year for 444 pounds of mail matter, and I do not understand that that 
rate is affected in anv wav by the distance that the mail has been handled or 


I believe 
certainly 
very low 
Another 



Coast Line, for 430 miles, fifteen-sixteenths of the distance, gets 
for 30 miles, one-sixteentli of the distance, we get IS cents. I he 


Coast lane gets 


40 


RAILWAY MAIL PAY. 


only three times as much for hauling the business 15times as far. Certainly this 
must evidence our getting a fair share of the revenue when we are permitted to 
exercise our rights. 

At the hearing in June the chairman of your committee asked me if I meant 
to suggest that the Government ought, to pay more for the mail service per¬ 
formed than it cost, or more than the Government got out of it. My reply was: 
“ Most assuredly.” 

Surely the Government does not expect us to haul mail at a loss because their 
revenue might not cover the cost. We do not share in Ihe profits and. of course, 
should not suffer the losses. 

If the Tost Office Department would abolish free delivery, they would show a 
profit of many millions instead of a loss. 

I believe that this committee will readily admit that the money is made for 
the Government by the railroad carriers. Suppose for a moment the Govern¬ 
ment had to transport its mail entirely through star routes or other like car¬ 
riers, can it be doubted that instead of tens of millions deficit it would not be 
hundreds of millions? 

If the railroads are making the money for the Post Office Department, how 
much greater the reason that they should he paid at least a reasonable profit for 
the service performed? 

Is it fair, is it legal to require us to work, not only without profit, but at an 
actual loss? 

Again referring to express rates and a comparison of mail pay with our ex¬ 
press revenues. 

The rate on cotton from Augusta to New York is 40 cents per 100 pounds. 
The rate on dry goods is 90 cents per 100, or considerably over twice as much, 
and yet both are composed entirely of cotton, both are handled in box cars, and 
both handled on freight trains, and yet no one, so far as I have ever heard, has 
taken the position that the rates should be the same. 

Again, if we haul coal as low, in some instances, as 34 mills per ton per mile, is 
that any possible reason why we should haul dry goods and cotton at the same 
rate? We earn per mile twice as much on fertilizers as we do on cotton seed, 
but is that a reason why fertilizers should take the same rate? No; I submit 
that we are entitled to a reasonable profit for handling the United States mails, 
no matter what we get out of the arrangement with the express company, and I 
submit that our arrangement with that company is a reasonable one, even 
though there is no profit to the railroads. Another difference between the two 
propositions is that when the express revenues increase from one month to 
another, we get the benefit of the increase, while no matter what the increased 
tonnage of our mails may be, nor does it matter how much we may have to in¬ 
crease our mail-car miles, our revenues from the mail service do not increase 
from one mail-weighing period to another; that is, for a period of four years. 
This, I think, should also be changed. Surely the present regulation can not be 
defended. 

For your consideration we submit that no matter what the divisor has been, 
our revenue has been low, and inasmuch as the rates paid us have been based 
upon the divisor heretofore used that divisor has become a basis upon which 
mail pay has been constructed and should not be changed. 

The tendency of mail rates, like all other rates, has been down, and we insist 
that with every expense pertaining to railroad operations going up and all rates 
going down, that it is a serious matter to disturb the very foundation upon 
which our pay was based and has been regulated for years. 

We further submit that if the present divisor is retained that our rates ]>er 
100 pounds should be materially increased. 

We further submit that a minimum mail car (or apartment car) rate per mile 
should be paid of not less than 20 cents, and for the reason that a less rate 
would not compare favorably with freight earnings per freight-car mile (our 
lowest rate profitable business), and for the further reason that any less mini¬ 
mum would not give us a substantial profit. 

We further submit that we should be paid for office and mail-car space, 
whether full-length cars or apartment cars. There can hardly be a reason why 
post offices on wheels should be furnished by the railroads, free of charge, and 
transported over the roads for the convenience of the department, whether they 
are 20 feet in length or 40 feet in length. 

In addition to the foregoing, we submit for your further consideration, an¬ 
swers to a number of questions bearing upon Ihe mail-car service performed by 
us, the pay received, and a comparison with other passenger-train earnings. 


BAIL WAY MAIL PAY. 


41 


From every point of view that has occurred to us, all figures point, with abso¬ 
lute conclusiveness, to the claim we make that we are not only badly underpaid, 
but that we are far from being paid the actual cost of the service performed. 

All of which is most respectfully submitted. 

Yours, very truly, ‘ A. W. Anderson, 

General Manager. 


Chestnut Ridge Railway Co., 

Palmerton, Pa., September 17, 1912. 


Hon. Jonathan Bourne, Jr., 

Washington, D. C. 


Dear Sir: I gladly avail myself of your kind request to lay before you any 
comments which may occur to me in connection with Senate bill 7371. 

Page 1 and page 2, lines 1 to 12: I heartily commend the curbing of the 
vast power of the Postmaster General by subjecting his methods to the review 
of the Interstate Commerce Commission. I feel, however, that railroads should 
be permitted to raise objection to the results obtained in each case as well as 
to the method employed. 

Page 2, line 23, should be amended to read as follows: “ He shall allow such 


rate.” 

Page 2, lines IS to 24: The scheme contemplated seems to me to require 
railroads to handle United States mail without compensation. Your proposition 
is that railroads shall perform this service, shall pay the current cost of doing 
it out of their own pockets, and at the end of the year shall simply receive 
back the money which they have actually spent, together with the customary 
bank interest on same. The railroads only get back the money which thej' have 
actually expended, with interest, and get nothing for the service rendered. 

Page 3, lines 7 to 12: The Postmaster General should be required to get his 
information from reports already tiled with the Interstate Commerce Commis¬ 
sion without imposing additional clerical burdens upon the railroads. 

Page 3, lines 13 to 25, and page 4, lines 1 to 18: The power of the Postmaster 
General should be subject to the control of the Interstate Commerce Commission 
in these as in all other matters. 

Page 7, lines 9 and 10: The Postmaster General should not be intrusted with 
the determining of the amount of fines without appeal. 

Page 9, lines 3 to 7: To deny to railroad companies the fundamental right 
of refusing to enter into an unsatisfactory contract without providing adequate 
safeguards in the shape of appeal seems to me to violate the Constitution of 
the United States and the principles which underly all human rights and laws. 

Yours, truly, 


P>. F. R. Clark, Auditor. 


Chicago & Illinois Midland Railway Co., 

Chicago, October IS, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Replying to yours of the 11th ultimo, addressed to Mr. J. ,T. Hart, 
former vice president of this company, to which is attached a copy of proposed 
Senate bill No. 7371. 

We do not consider the present plan of compensation an equitable one as 
between the Government and this company. Under the present system mail 
is weighed quadrennially, and the basis of compensation is fixed by the Gov¬ 
ernment for that period, based on weight so ascertained, whereas the volume 
of the mail business is constantly increasing, with the result that under the 
existing plan the railroad receives no corresponding increase in revenue, which 
we believe should be conceded by reason of such increase. Under the present 
system the employee of the railroad company is compelled to carry the mails 
between the mail car and post offices in towns served by the railroad where 
the post offices are within 80 rods of the railroad’s right of way. Y\ e are con¬ 
strained to the opinion that the service of the carrier should properly terminate 
at its passenger stations. We do not consider the plan embodied in the proposed 
bill, which contemplates compensating the railroad companies on basis of actual 




42 


RAILWAY MAIL PAY. 


cost of the service, plus 0 per cent, as being remunerative, considering the char¬ 
acter of the service performed. Furthermore such basis of compensation would 
not admit of the setting up of a reserve with which to purchase mail cars in 
the future, as they could not be purchased of the builders on a 6 per cent basis. 

We believe that the basis of settlement between the Government and the 
railroads should be on practically the same lines as is the express business, i. e., 
at an agreed and remunerative rate per 100 pounds at actual weight, monthly 
settlement to be effected between the Government and the railroads as at 
present. 

Respectfully submitted. 

II. H. Seaverns, Traffic Manager. 


Chicago & Lake Superior Railway Co., 

Cambridge, Wis., September 25, 1912. 

lion. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Referring to your letter of September 11, regarding the new bill 
about to be placed before the Committee on Post Offices and Post Roads, 
asking our opinion upon the desirability of said bill, will reply: 

No. 1. We db not deem the present plan of compensation an equitable one, 
for the reason that under the present plan the larger roads are receiving larger 
compensation for the work they are doing in accordance with their mileage, 
while the smaller roads with short mileage are not getting enough to pay the 
trouble of handling the mails; for instance, this road being a trifle less than 4 
miles, is carrying for the Government eight mails a day, four each way, for 
which we receive the nominal sum of $180 per year, which shows on the face 
of it that it is not enough. 

No. 2. The plan embodied in bill S. 7371 would not remedy this matter for 
the smaller lines. Take, for instance, this line, only having the mileage before 
stated, would not receive proper compensation for services rendered, and there 
should be a clause to protect the smaller lines in order that they may receive 
better compensation for their work. 

No. 3. In our opinion a most desirable plan for compensating railroad com¬ 
panies for transportation of mail would be to place a sentence in this bill 
making the compensation for all roads with a mileage under 5 miles a special 
rate per mile, which would be enough to cover the expenses of handling the 
mail services. As before stated, this line is carrying eight mails per day and 
receiving compensation, carrying these mails to and from the post office to 
trains. We would, be unable to hire a person to carry the mail from the 
Cambridge depot to the post office for the amount we receive for same, let 
alone the handling and responsibility of same while en route on trains and 
delivery of mail at London. I feel if you would look into this matter care¬ 
fully you will see that we are right in the above statement. 

Yours, truly, 


B. L. Delamater. 


Chicago & Northwestern Railway Co.. 

Chicago, Ill., November 25, 1912. 

Hon. Jonathan Bourne, 

Washington. D. C. 

Dear Sir: Answering yours of September 11, 1912, transmitting bill No. 
7371. introduced by you, and requesting replies to inquiries relative to the 
present and proposed plan as a basis for compensation to railroad companies 
for transportation of the mails, on behalf of the Chicago & North Western 
and Chicago. St. Paul. Minneapolis & Omaha Railway Co’s., we respectfully 
submit the following answers to your inquiries: 

First. We deem the present plan of compensation equitable, if modified as 
follows: 

(A) Annual weighing of the mails. 

(B) No reduction in the present rate of pay for transportation. 

(C) Pay for space provided in apartment postal cars upon the basis of pay 
for railway post-office cars 40 feed in length, inside measurement. 




RAILWAY MAIL PAY. 43 

( I>) Relief from the performance of side and terminal messenger service 
regardless of distance between the }>ost office and railroad station. 

(L) Readjustment upon the basis of weight within a reasonable time after 
the establishment of parcel post. 

Second. The underlying principal of the plan embodied in Senate hill No. 
Toll is not correct for the following reasons: 

(A) Contrary to all economic principles of business, and the method of 
which, if applied separately to the different classes of business, would ruin 
and bankrupt every railroad at once. 

(It) Objection to granting authority to the Postmaster General to credit, as¬ 
sign, and apportion the revenues and expenditures of railroad companies. This 
accounting should he made in the usual manner adopted in accounting, or as 
directed by the Interstate Commerce Commission, granting railroad companies 
right to appeal to the courts. 

.(C) Objection to nonpayment for service over land-grant railroads or parts 
of railroads covered by land grants, being unfair and unjust. 

(D) Objection to being required to piace railway post-office and apartment 
postal cars for the purpose of performing advance distribution without an 
allowance of pay for the time cars are so placed and used. 

<E) Objection to providing depot space for handling and distribution and 
transfer of mails en route, except for transfer clerks’ quarters and space for 
use of railway post-office clerks for the purpose of storing their personal and 
official property between runs without a specific rental therefor. 

(F) Objection to failure to specifically provide for rate to be paid for space 
devoted to the distribution of mails in transit in railway post-office and apart¬ 
ment postal cars. 

(G) Objection to deductions for reduction or frequency of service unless ad¬ 
ditional pay lie allowed for additional service and frequency of service during 
the period for which the adjustment is made. 

Third. The present plan with modifications as stated in answer to inquiry 
No. 1. 

Respectfully, W. A. Gordon, President. 


Chicago, Burlington & Quincy Railroad Co., 

Chicago , October <S, W12. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: I am in receipt of your communication of September II, propound¬ 
ing certain inquiries in reference to the present plan of compensation of the 
railways for handling the mail and requesting an expression of opinion from 
me as to the plan of Senate bill 7371. 

I find that the committee on railway mail pay, upon which this company is 
represented, addressed a communication to you on the 3d instant in reference 
to the same subject. After carefully reading the letter of this committee, I 
beg to say that it fully accords with my own opinion in every particular. 

The unfair administration of the present law gives ground for serious com¬ 
plaint and imposes serious losses upon the railroads. I feel certain that if the 
conditions are fully investigated and considered by your committee it will reach 
the same conclusion. 1 have no confidence in the justice of any plan of com¬ 
pensation based upon cost plus 0 per cent The underlying principle is wrong, 
because is penalizes efficiency, as fully stated by the committee. No other rates 
in the country are so based. In order to ascertain cost many intricate compu¬ 
tations based upon numerous arbitrary assumptions will he required, and the 
results found in Senate document 105 upon this subject indicate that it would 
be impossible for the railroads to agree with the department upon the methods 
for determining such cost. 

I feel that the remedy is to correct the wrongs that are being worked under 
the present law rather than to experiment with a wholly new principle as a 
basis for compensation. 

I wish to adopt the answer of the committee on railway mail pay as a part 
of the reply which I submit to your honorable committee in behalf of both the 
Chicago, Burlington A Quincy Railroad Co. and the Colorado A Southern Rail¬ 
way Co. 

Yours, respectfully, 


D. Miller, I * resident . 



44 


RAILWAY MAIL PAY. 


Chicago, Milwaukee & Puget Sound Railway Co. 

Chicago, November 5, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir: In reply to your circular letter of tlie lltli ultimo, the follow¬ 
ing is respectfully offered for your consideration: 

(1) The theory of the present plan of compensating railway companies upon 
the basis of weight carried and special car space and equipment provided is, 
in my opinion, equitable. In its practical working out the compensation is in¬ 
adequate under the Postmaster General’s Order No. 412 and the last reduction 
in the rate. 

We believe also that we are entitled to compensation for apartment-car space 
on the basis of a pro rata of the rate allowed for full 40-foot R. P. O. cars. 

(2) Any legislation under which the Government makes the maximum pay¬ 
ment for service rendered the actual cost plus G per cent, such cost to he de¬ 
termined by the representative of the Government, is not equity, but an arbi¬ 
trary exercise of governmental power. It gives the purchaser the exclusive 
right to fix the price of that which is purchased. 

(3) Payment on the basis of weight carried and exclusive space furnished at 
compensatory rates. 

I understand that the objections to the proposed bill from the standpoint of 
the carriers, are being formulated in detail and will be presented to you by the 
committee on railway mail pay, together with their comments upon House 
Document No. 105, Sixty-second Congress. 

Yours, very truly, E. D. Sew all, 

Vice President. 


Chicago, Milwaukee & St. Paul Railway Co. 

Chicago, November IS, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir: Replying to the questions in your letter, relative to Senate bill 
7371: 

(1) I consider the present plan of compensation as fair as any that could be 
devised as between the Government and the railroads, although, since the Post¬ 
master General’s Order No. 412 and the last reduction in the rate, the compen¬ 
sation seems inadequate. I also think apartment cars should be paid for at the 
pro rata rate allowed for full 40-foot R. P. O. cars. 

(2) I do not think the underlying principle of the plan embodied in bill S. 
7371 is a proper basis for compensation for the reason that weight is generally 
used as a basis of compensation instead of space, although space is considered, 
to some extent, in the present method; and besides the bill allows too much 
discretion to the Postmaster General. 

(3) As stated in answer to question No. 1, I consider the present method a 
reasonably fair one. 

I understand that what is known as the committee on railway-mail pay, rep¬ 
resenting a number of the roads of the country, is preparing answers to the 
three questions in your letter, setting forth, in considerable detail, the objec¬ 
tions to the proposed change in the method of arriving at compensation to the 
railroads for carrying the mails, and also stating the objections of the railways' 
to House Document No. 105, Sixty-second Congress. 

Yours, truly, E. IV. McKenna, 

Viee President. 


Chicago, Peoria & St. Louis Railway Co. of Illinois, 

Springfield, 111., September 23, 1912. 

Hon. Jonathan Bourne, Jr. 

Washington, D. C. 

Dear Sir: In replying to your esteemed favor of the lltli instant, in which 
you ask for suggestions or criticisms in connection with Senate bill 7371. to 
provide the manner of determining the compensation of railroads for the trans¬ 
portation of mails, the only suggestion or criticism which I can offer at this 




RAILWAY MAIL PAY. 


45 


time is contained in the broad statement that, in my estimation, a great waste 
of energy and money has been incurred in the preparation of the bill re¬ 
ferred to. 

In my opinion a much more satisfactory bill could have been prepared had 
those in charge of the work thought to provide one wherein it was provided 
that the Postmaster General shall have the power to compel any and all rail¬ 
roads to handle United States mail in any and all trains and cars and fix the 
compensation to be paid for the service rendered. Upon the order of the Post¬ 
master General all railroads shall furnish free transportation to all employees 
of the Post Office Department and provide special equipment in which said 
employees should be privileged to ride, and, finally, that any laws now on the 
statute books giving to the railroad companies any rights whatever inconsistent 
with the foregoing should be repealed and the passage of any such laws in the 
future prohibited. 

In other words, I think that Senate bill 7371 is as inequitable and unfair to 
the railroads as'any such bill could possibly be. It gives absolute and dicta¬ 
torial powers to the Postmaster General and names as the sole arbitrator to 
be appealed to in case of dispute another department of the Government, So 
far as the transportation of mails is concerned, the relation the Government 
bears to the railroad companies is the same as that of the express companies 
to the railroad companies, and I think the railroad companies, in the handling 
of United States mails, are entitled to contractural rights. The Constitution 
of the United States does not contemplate in any manner the idea of placing 
in the hands of any one man dictatorial powers such as it is proposed to confer 
upon the Postmaster General in Senate bill 7371. 

I am, yours, truly, John P. Ramsey, 

„ duel Executive Officer . 


Chicago, Terre Haute & Southeastern Railway Co., 

Chicago, October 25, 19 12, 

lion. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: In reply to your letter of September 11, inclosing a copy of 
Senate bill 7371 : Without giving a detailed discussion of the bill, I shall 
merely point out to your committee that the proposed plan of this bill applied 
to all business in this country would wreck the Nation; or applied to any single 
enterprise—industrial or railway—would destroy that. 

I have seen a copy of a letter addressed to you by the committee on railway 
mail pay, dated October 3, and I am in full accord with the position of the 
committee therein taken. 

Yours, very truly, M. J. Carpenter, President. 


Coal & Coke Railway Co., 
Elkins, W. Va., September 19, 1912. 

Hon. Jonathan Bourne, Jr., Chairman , 

Washington, D. C. 

Dear Sir: Your favor of the 11th instant is received. I am not in a posi¬ 
tion just at present to reply fully to your inquiries. I have spent considerable 
time during the last two years on this subject and I believe the present plan 
of compensation for railway mail services is entirely unfair to the railroads, 
and especially so to the smaller roads, such as this one. 

I believe the underlying principle of the plan embodied in Senate bill 7371, 
copy of which you inclose, is also unfair. I am unable at this time, however, 
to prepare a condensed statement of my reasons and of my suggestions as to 
what would be fair, but will be very glad to furnish a statement of this sort 
as soon as we can have the necessary information prepared. 

Unfortunately this road suffered heavily in the recent floods, and we are at 
present necessarily spending all our energy to repairing the damage. 

Very respectfully, 


A. M. Smith, General Manager. 



46 


RAILWAY MAIL PAY. 


CROSBYTON-SOUTHPLAl NS RAILROAD CO., 

Crosby ton. Ter., September 2h, 1912. 

Hon. Jonathan Bourne, 

Washington, D. C. 

Dear Sir: Replying to your circular letter of the lltli instant, with which 

was inclosed Senate bill 7371. ,. • 

Replying to your first question, I can see no method of fixing coinpensatio 
for postal service on this line which would be more equitable than the one now 

in use. . . . 

To the second question, while it may be possible that the principle ot plan 
embodied in the bill is correct, I do not feel that G per cent added to the actual 
cost of handling the mail is a sufficient remuneration for this class of mail, 
considering the fact that it requires the highest class of service which we are 
capable of giving and we are subject to heavy fines for any failure to perform 
our duty fully and promptly. On a line such as this, with but a single dail.v 
train service—handling freight, passengers, mail and express on one train—it 
would be almost impossible to separate the cost of handling mail from the other 
classes of service rendered, and the only way which would occur to me to do 
this would be to fix an arbitrary percentage, which might he correct and would 
more likely be incorrect. 

To the third question, I can see no more just plan for fixing compensation 
than on a pound basis coupled with car-foot basis. 

Yours, very truly, A. B. Spencer, 

Assistant General Manager. 


Cumberland Valley Railroad Co., 

Gh<nnber*bnrg, Pa.. October 2'/. 1912. 

Hon. Jonathan Bourne, Jr., 

Washington. D. G. 

My Dear Sir: Your circular letter of September 11 was duly received, and 
I thank you for the opportunity of explaining the deficiency in the amount 
allowed by law to the Cumberland Valley Railroad Co. for carrying the mails 
and for the expensive facilities needed by the Post Office Department in con¬ 
nection therewith. 

The questions you ask as to the effect of the present plan of compensation on 
railroads generally and the effect of proposed laws such as Senate bill No. 
7371 can best he answered by those who have made a general study of the sub¬ 
ject. 1 have read a copy of the response to you from the committee on rail¬ 
way-mail pay, representing 268 railroads, and it seems to be a fair and adequate 
summary of the defects and the suitable remedies. 

On behalf of the Cumberland Valley Railroad I request your particular atten¬ 
tion to the urgent necessity for a provision of law to pay for mail apartments 
on some basis that will compensate for their service. The railroads get no pay 
at all for these mail apartments 30 feet or less in length, although these travel¬ 
ing post offices perform the same function as full railway post offices and are 
not at all needed by the railroad company in transporting the mail; also for a 
provision of law to pay for side and terminal messenger service at its fair value 
to the Post Office Department. It is further of great importance that a definite 
arrangement be made, so that when a railroad company considers itself under¬ 
paid or subjected to unduly onerous conditions an appeal from the decision 
of the Postmaster General may be heard by some neutral authority with power 
to determine finally the justice of the case. 

I believe that the United States Supreme Court has held that the railroads 
(other than land-grant roads) are not obliged to carry the mails, and it is there¬ 
fore assumed by many that the railroads are fiee agents, and if they continue to 
carry the mails it must be because they consider the rates of pay remunerative 
regardless of tlieir protestations. If they have the theoretical right of refusing 
the mail service, they can not exercise the right without ignoring the fact that 
/ the communities dependent upon them must have communication by letters, etc., 
and as the law gives the monopoly of first-class mail to the Post Office Depart¬ 
ment a refusal by the railroad to accept mail service would cause very 
great inconvenience and loss to the people. Hence Congress should protect the 
railroad companies in the performance of this public duty by guaranteeing a fair 
return both by a positive enactment prescribing adequate and definite rates and 



RAILWAY MAIL PAY. 47 

iilso h.v providing for some arbitral tribunal for adjusting differences between 
tlie Tost Office Department and the railroad company. 

In the test of November, 1909 (H. Doc. No. 105), the Postmaster General 
found that Ihe mail pay for the Cumberland Valley Railroad fell short by 2d 
per cent of covering the operating cost and taxes chargeable to the mail service. 
Our own calculation at that time showed a shortage of about 35 per cent, and 
we still believe that our own computation was more correct than that of the 
Post Office Department. The deficiency in either case is really much greater, 
because both calculations contain no allowance for fixed charges. 

The annual pay of the company for all the mail service covering R>0 miles 
of railroad and including double daily, and in one part triple daily, mail apart¬ 
ment service occupying 25 or 30 feet of the car, is only a little over $21,0)0. 
To obtain a fair return, including 6 per cent dividend.’it can readily be esti¬ 
mated that the amount should be at least $37,000 per annum, or an increase of 
$10,000, or about -SO per cent. 

This would require an allowance for a daily round trip of a mail apartment 
car (in addition to the pay for weight of mail carried) on about the following 
scale: 

lVr milt* per annum. 

30-foot apartment___$03. 50 

25-foot apartment_ 53.00 

20-foot apartment__ 42.50 

It is trusted that your committee will succeed in securing legislation to correct 
this long-standing injustice. 

Very truly, yours, M. C. Kennedy, 

1 ire President and (ieneral Superintendent. 


Deering Southwestern Railway, 

Chiea-go, September 20, 1012. 

Hon. Jonathan Bourne, 

Washington, D. C. 

Dear Sir: I have your very courteous letter of the lltli instant, together with 
copy of Senate bill 7371. 

The service this railway now performs in handling United Stales mail sim¬ 
ply in sack form, without any collection or distribution, warrants me in saying 
we are reasonably well satisfied with our present compensation. This, however, 
refers only to this railway. We do not believe the plan proposed by the bill 
would be a reasonable compensation of the service an ordinary mail-carrying 
railroad would perform, and should this company at any time undertake the 
collection and distribution of mail between stations on its various lines—that 
is, the handling of individual pieces of mail—we should certainly find this bill 
an additional expense against our operation rather than a matter of income. 

This writer also has particularly in mind the prospect of handling mail under 
the parcel-post act, and unless some special provision is made for the parcel 
post—some special compensation—this company would certainly strenuously 
object to the basis of compensation proposed in Senate bill No. 7371. 

Answering your direct questions: 

1. The present plan of compensation seems to this writer to be reasonably 
equitable, and in making this reply he has reference particularly to mail han¬ 
dled by this company under the plan now in vogue. 

2. The underlying principle in the plan embodied in Senate bill 7371 is not a 
proper basis for compensation, because it would not begin to compensate a 
railroad for the service performed. No railroad can afford to handle its traffic 
for the actual cost of the service plus 6 per cent, because of the underlying 
obligations in the shape of securities that must be met, as well as taxes etc. 

3. This writer lacks sufficient familiarity with the whole mail-carrying 
problem as practiced on the trunk lines to give any information of value. It is 
his belief, however, that the United States Mail Department should compen¬ 
sate the railroads for the service they perform in a liberal manner, so the service 
may be extended and of the very best character. Much complaint is being 
beard in this city and in some other places regarding the inadequate mail 
facilities. What causes this the writer does not know, but statements are 
made in the daily press not infrequently that mail is delayed in transit, is 
delayed in delivery after arrival in Chicago, and certainly a complete study 








48 


KAIL WAY MAIL PAY. 


of the whole problem should be made by your honorable committee into its 
minutest details before passing an act regulating this matter. 

Regret I am not able to advise you more fully. Relieve me, 

Very truly, yours, 

F. B. Montgomery, 
President and General Manager. 


Delaware, Lackawanna & Western Railroad Co., 

New York, October SI, 1912. 

H»>n. Jonathan Bourne, Jr. 

Washington, D. C. 

My Dear Sir: Your letter of September 11 to our secretary, Mr. A. D. Cham¬ 
bers, with accompanying copy of Senate bill No. 7371, being a bill to provide 
the manner of determining the compensation of railroads for the transportation 
of the mails, and the several questions you submit, have had careful considera¬ 
tion at the hands of our people. 

Answering your several inquiries in the order in which they are made, I beg, 
in behalf of this company, to submit the following: 

(1) The present plan of compensating the railroads for the transportation 
of United States mails, broadly speaking, is as fair and equitable a one for 
the railroads generally as could probably be devised. From the Government’s 
standpoint it certainly never has been inequitable,' while, on the contrary, so 
far as the railroads are concerned in the administration of it. much injustice 
has almost continuously been done ever since it was adopted. 

In the first place, the infrequent weighing of mails, whereby this is done 
every four years, has unquestionably resulted in the railroads carrying, dur¬ 
ing each period of four years, somewhere between 5 and 10 per cent in weight 
of the total mails carried without any compensation whatever. Again, the rail¬ 
roads have been required to perform services between stations and post offices, 
also terminals, in the way of delivery of mails, at a considerable expense, for 
which they have never been paid. Still again, the horizontal reduction in pay 
made by the act of Congress on March 2, 1907, followed by Order No. 412 of 
the Postmaster General changing the divisor, has worked serious injustice and 
loss to the railroad companies. 

Furthermore, under the regulations of the Post Office Department the rail¬ 
roads are required to handle mails on all trains, and there are innumerable 
instances where this service has been ordered on trains, the nature of same 
requiring a full extra car to be hauled by these trains in order to provide the 
space required by the Post Office Department for a comparatively small amount 
of mail. The railways are also required to furnish, free of rent, at nearly all 
important terminal points, space for the storage and handling of mails, and 
heating and lighting of the space furnished, as also other accommodations for 
postal employees which cost them in the aggregate large sums of money to pro¬ 
vide and maintain. 

The recent reductions in compensation for carrying mails referred to above 
have been made in the face of large increases in the cost of almost every item 
entering into the expense of railway maintenance and operation. Railway com¬ 
panies, furthermore, are continually assessed with fines for failure to deliver 
mails on the scheduled time of trains, although the delays in many cases are 
due to causes wholly beyond the control of the company or its officers. 

(2) The plan embodied in Senate bill No. 7371 for compensating the railroads 
for transportation of United States mails is not a proper and just basis for such 
compensation, and if made effective by law will work gross wrong and injustice 
to the railroads of the country. The proposition to place solely in the hands 
of the Postmaster General of the United States the question of determining 
what the railroads should receive for performing this important service, coupled 
with the provision in the bill fixing the method to be pursued by that official 
in determining the amount of compensation to be paid, is, as we believe, with¬ 
out precedent in this country and amounts to the Government taking from the 
railway companies their property, or the use of their property, for the public 
benefit, without due compensation. Ihe operating cost of performing the serv¬ 
ice, arrived at as prescribed by the bill, together with the taxes plus 6 per cent 
for profit, would not by any means justly reimburse the railways for the serv- 


* 



RAILWAY MAIL PAY. 


49 


ice performed for the Post Office Department in the manner that department 
requires it done through its various administrative orders. It is wholly with¬ 
out precedent in this country, we believe, and entirely wrong in prnciple, that 
a department of the United States Government should be given the power con¬ 
templated in this bill to use the facilities of the railroads of the country for its 
purposes on terms fixed by the officials in that department, the interest of such 
officials being palpably to make the best showing they can for their department 
regardless of the effect upon the railways of the country, upon which it must 
so entirely depend to perform the postal service for the public. 

The interests of the railways in this matter will not be properly safeguarded 
by a provision that an appeal from the Postmaster General may be taken to 
the Interstate Commerce Commission. Not only is that commission now so 
unduly burdened by the duties imposed upon it by existing laws, as respects 
the regulation of railway rates and practices, that it can not possibly assume 
the additional work and responsibilities incident to fixing a just compensation 
for the transportation of United States mails, but its position is and always 
has been, since its original appointment, that, its duty is to watch over and 
protect the interests of the public, and not the railroads, in all matters affect¬ 
ing rates and rules governing the transportation of passengers and freight. 

(3) It does not seem, to us that any better or more equitable plan for com¬ 
pensating the railroad companies for the transportation of United States mails 
can be adopted than the existing one, which has been in effect for many years 
and with the operation of which all concerned, both the postal authorities and 
the railways, are more or less familiar. We believe it might be amended in 
the manner hereinbefore suggested, which would result in the elimination of 
some inequities which now exist and whch should, in all fairness to the rail¬ 
roads, result in a more impartial adminstration of the law by the postal authori¬ 
ties than has been prevalent heretofore. 

Trusting what I have stated herein may, in some measure at least, commend 
itself to your careful consideration, I beg to remain, 

Very truly, yours, W. II. Linsdale, 

President. 


Denver & Rio Grande Railroad Co., 

New York, September 13, 1912. 

Hon. Jonathan Bourne, Jr., Chairman, 

Washington, D. C. 

My Dear Sir : Your letter of the lltli instant and copy of Senate bill 7371, 
introduced by you on behalf of the Senate Committee on Post Offices and Post 
Roads, came this morning, and both have been referred to the operating staff 
in San Francisco—Mr. C. M. Levey, second vice president and general manager, 
and Mr. Warren Olney, jr., the general attorney. Western Pacific has been 
favored thus far with but very little United States mail. 

Yours, sincerely, E. T. Jeffery. 


Denver, Boulder & Western Railroad Co., 

Boulder, Colo., September 19, 1912. 

Hon. Jonathan Bourne, Jr., Chairman, 

Washington, D. C. 

Dear Sir: Your esteemed favor of the 11th instant with inclosure as stated 
is received. 

As applied to this company the present plan of compensation for transpor¬ 
tation of the United States mails, which provides for a minimum rate of $42.75 
per mile per annum, is regarded as equitable, except that it is believed that in 
addition to the compensation now received the Government should remunerate 
the railroad company for the space devoted to the use of the mails in combi¬ 
nation passenger, mail, baggage, and express cars, such compensation to be 
pro rata to the amount allowed for cars 40 feet in length used exclusively for 
the handling of the mails, as provided under section 1176 of information rela¬ 
tive to transportation of mails by railroads issued by the Second Assistant Post¬ 
master General. 

Respectfully, W. B. Hayes, President. 


74972—13 


4 





50 


RAILWAY MAIL PAY. 


East Broad Top Railroad & Coal Co., 

Orbisonia, Pa., September 16, 1912. 

I Ion. Jonathan Bourne, Jr., Chairman. 

Washington, I). C. 

Dear Sir: Your circular letter of September 11, regarding Senate bill 7371. I 
!beg to submit the following answer to your questions: 

1. The present plan of mail compensation so far as it relates to service per¬ 
formed by tliis company is equitable. 

2. So far as short lines are concerned, operating under conditions similar to 
•ours, the underlying principle of plan embodied in Senate bill 7371 is not equi¬ 
table. It leaves railroads practically at the mercy of the Post Office Department. 
The department is privileged to demand whatever service and equipment it 
wants and pays whatever it pleases in the way of compensation. 

No short line can afford to antagonize the department, and to combat their 
decisions may cost several years’ earnings. 

The idea of not allowing a railroad to judge whether they can afford to 
handle mail for compensation allowed can not be considered equitable. 

The authority given the department to order mail-car service, particularly on 
short lines, may mean more of an outlay for equipment than revenue would 
amount'to in five or six years, to say nothing of the expense of maintenance and 
continual transportation of a car that may not be needed. 

3. This question is virtually answered by No. 1. Present plan is apparently 
all right for short lines, particularly when no mail-car service is required. The 
pouch system, which is the one in vogue here, gives satisfaction. Post offices 
have two mails from each direction every day and compensation is based on 
weight of mail handled. 

Yours, truly, Edward C. Hall, 

General Manager. 


Farmers’ Grain & Shipping Co., 

(Devils Lake & Northern R. R.), 

Devils Lake, N. Dak., September 18, 1912. 

Dear Senator: This will acknowledge receipt of yours of the 11th inclosing 
copy of Senate bill 7371. and in reply to question No. 1 would say that I do 
not consider the present plan of compensation for carrying the mails as an 
equitable one as between the Government and short railroads, such as ours, 
which is but 66 miles long, mainly for the reason that we do not obtain sufficient 
compensation under this plan. 

In answer to your second question, I object to the principle of your bill for 
the reason that I can not understand why Government service should be per¬ 
formed at actual cost any more than any other service, and furthermore for 
the reason that under the proposed payments for postal service established 
under this bill we w r ould not get enough revenue to pay the cost of maintenance 
of the postal car aside from the cost of train service and the delivery of the 
mails. 

I have before me a statement from the Post Office Department of the com¬ 
pensation we are to receive under this bill, and it shows that we are now re¬ 
ceiving 70 per cent more than we would under your bill; at least this is the 
way the department has figured it. We are now receiving about $10 per trip 
for supplying, maintaining, and hauling compartment car for a distance of 132 
miles, delivering and receiving the mails at 10 different stations, where we have 
to pay our agents extra for this service, besides the wear and tear on the car, 
which has to be renewed every few years. From this you will see for yourself 
that if our compensation is reduced 70 per cent that the Government is forcing 
us to do something for next to nothing. As it is now we are performing the 
service at 40 per cent below cost, regardless of the department’s figures, and we 
are doing so for the reason that we wish to accommodate our patrons and not 
for any profit in the business. Therefore I would seriously object to the last 
clause, on page 9 of the bill, which penalizes a railroad for refusing to carry 
the mails for such compensation, for I assure you we would positively refuse 
to carry this mail for any such compensation, and the Government would find 
It would cost them $100 per trip when carried by team for the service we are 
now doing for $10. 

In reply to your third question I would say that the proper method of com¬ 
pensation for such railroads as ours would be for the Government to pay for 
the space occupied by the postal section of a car or a full postal car at the same 



RAILWAY MAIL PAY. 


51 


ju erage rate of earnings as if occupied by express or passengers, and I fail to 
see why the Go\ eminent should have a cheaper rate than anyone else. Under 
t 11 s method we would receive about 40 per cent more than we are now getting, 
which in oui case would about pay the expenses of carrying the mails 
Very truly, yours, 

Jos. M. Kelly, President. 

senator Jonathan Bourne, 

Washington, D. G. 


Hon. Jonathan 


Fort Smith & Western Railroad Co., 

St. Louis, El Reno & Western Railway Co., 

Fort Smith, Ark., September 17, 1912. 

Bourne, Jr., 

Washington, D. G. 


T Dl ^ R Sir: In response to your favor of September 11 regarding Senate bill 
No. Toll, beg to advise that the reply of Mr. W. E. Crane, our vice president, 
will include the views of this office regarding the subject. 

Assuring you that the inquiry is highly appreciated, I remain, etc., 

Yours, very truly, 

W. M. Bushnell, General Manager. 


Fort Smith & Western Railroad Co., 

St. Louis, El Reno & Western Railway Co., 

St. Louis, Mo., September IS, 1912. 

Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: With reference to your letter of September 11, inclosing bill S. 
7371, I inclose herewith a copy of a letter received from Mr. W. M. Bushnell, our 
general manager, which will give you the views of the Fort Smith A Western 
Railroad Co. on this question. I trust that it may have your committee’s seri¬ 
ous consideration. 

Yours, very truly, W. E. Crane, 

Vice President. 


Fort Smith A Western Railroad Co., 

St. Louis, El Reno A Western Railway Co., 

Fort Smith, Ark., September 17, 1912. 

Mr. W. E. Crane, Vice President, 

St. Louis, Mo. 

Dear Sir: In response to your favor of September 14 regarding Senate bill 
7371. 

T beg to submit the following in reply to Mr. Jonathan Bourne, jr.,. inquiries 
1, 2, and 3. 

(1) I do not consider the present plan of compensation equitable, for the 
reason that the basis is an arbitrary one having no relation whatever to the cost 
of handling the business or of allowing the carrier a reasonable profit; or, in 
other words, a reasonable rate of interest on that proportion of the investment 
which we consider necessary in performing the service. 

(2) The underlying principle embodied in Senate bill 7371 is defective, for the 
reason it proposes that the profit for handling the mails shall be G per cent of 
the cost of such service. 

This railroad has an investment of over $6,000,000, and it costs in round num¬ 
bers $600,000 per year to operate it. If the courts were to hold that a reason¬ 
able return on the investment was 6 per cent of the cost of operation, its 
maximum net earnings will then be about $36,000 per annum, equivalent 
to a fraction over 1 per cent on the total investment. 

(3) I believe the railroads desire a plan that will cover the cost of handling 
the mails plus a reasonable rate of interest on such part of the railroad as may 
be said is required to move the traffic. 

In a letter written some time ago I reasoned that $750 per mile was in our 
case a fair value upon which to base at 6 per cent our profit for carrying the 
mails. This valuation equals less than 24 per cent of the investment and was 





52 


RAILWAY MAIL PAY. 


arrived at by assuming that cost of operation was the proper basis for appor¬ 
tioning the cost of the railroad for rate-making purposes on passenger traffic, 
then subdivided the expense of handling passenger traffic between passenger, 
mail, and express upon a car-foot basis. 

I am aware of the difficulty involved in reaching a satisfactory solution of 
this question, but I feel that the railroad as it stands to-day is just as neces¬ 
sary in its entirety for handling the United States mails as it is for any other 
class of traffic, and feel that the formula for apportioning the investment is 
fair. 

I do not believe that the Government or any one, in fact, can with an invest¬ 
ment of $750 per mile provide as satisfactory facilities as we do for collecting 
and distributing the mail over this line. 

As to House Document No. 105, there is very little criticism to offer, except 
with respect to that part of the Postmaster General’s recommendation that the 
railroad’s profit be based upon 6 per cent of the cost of operation. This propo¬ 
sition is wrong from every point of view and should be rejected by the railroads. 
What the roads should contend for is a return upon their investment. 

Generally speaking, we agree with the formula adopted by the Postmaster 
General in ascertaining cost of handling the mails. In our particular instance 
the Postmaster General’s figures show that during the month of November, 
1909, the Fort Smith & Western handled the mails at a loss of $177. Had the 
test been made in May or June of the same year, with the same formula, it 
would have shown a very much greater loss, and this loss did not include any 
margin above the actual cost of handling the business. 

I believe if Congress would go into the matter thoroughly that a method 
could be found which will more nearly do justice to this road than the one in 
vogue at present. 

Yours, truly, W. M. Bushnell, 

General Manager . 


Galveston, Houston & Henderson Railroad Co., 

New York, September 16, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: I have received your letter of the 11th instant in the matter of 
the compensation to be paid to railway companies for transportation of the 
mails. It will give me pleasure to reply to your inquiry a little later. 

Yours, truly, 

J. N. Wallace, President. 


Hoosac Tunnel & Wilmington Railroad Co., 

Malone, N. Y., September 30, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Sir : Yours of the 11th, inclosing copy of Senate bill 7371, relative to compen¬ 
sation to railroads for carrying the mails, and asking my answer to three ques¬ 
tions therein propounded, is received. 

First. To the first question I answer no. It is not fair to short-line rail¬ 
roads, whose compensation under the existing methods is wholly inadequate, 
arbitrary, and inequitable. 

Second. To the second question I answer no. It attempts to confer on the 
Postmaster General the power to determine the compensation for the perform¬ 
ance of a service by a company, where his interest is, by virtue of his office, to 
be exerted in behalf of the Government, and he is interested, and should be, in 
maintaining as low a cost of transportation as he can. It is like proposing that 
one party to a contract shall have power to dictate its terms and then fining the 
other party if he does not comply with them. It is against all moral sense of 
justice and equity, and the method of appeal to the Interstate Commerce Com¬ 
mission is not only likewise partial but burdensome and expensive, especially to 
short-line railroads, that can not afford to keep a corps of lawyers, engineers, 
statisticians, etc., to appear before the commission; and the commission’s em¬ 
ployees are partial and have no responsibility except to the Government, and 
can not know the different conditions that affect different railroads on the sub¬ 
ject of cost, and have no interest for the railroad companies. 




RAILWAY MAIL PAY. 


53 


Your steel-car clauses may be well enough for trunk lines, but there are hun¬ 
dreds of short-line railroads that can not afford or operate steel cars. The bill 
attempts to confer too drastic and sweeping powers on the Postmaster General, 
and its constitutionality may well be questioned. In fact, the whole bill seems 
to be inequitable, drastic, and socialistic. 

Third. To the third question I answer: There is no reason why the Govern¬ 
ment should not pay railroad companies the same price individuals pay for like 
service. A railroad company, being acquainted with its expenses of operation, 
can determine at what price per hundred pounds it will transport the mails, 
furnish cars, etc., and if the Postmaster General is not content with them, then 
let him do as any other shipper may—appeal to the commission, State or 
national, from whose decision an appeal to court should be allowed. Such a 
method would be more equitable and make it usually a matter of contract, as it 
should be. We must assume the office of Postmaster General will look after 
the interests of the Government and the railroad company will look after its 
own interest, and from that a more equitable situation will result than through 
the drastic and socialistic methods proposed by this bill. 

Hoping I have fully answered your inquiry, I am, 

Very truly, yours. J. p. Kellas. 


Jonathan Bourne, Esq.. 

Washington, D. C. 


Idaho Southern Railroad Co., 
Milner, Idaho, November 2 , .1912. 


Sir : Replying to yours of September 11, relative above numbered bill, in 
reply to question 1, would say that I consider the present plan is equitable 
between this company and the Government. I have no figures as to other 
classes of railroads, and am, therefore, not competent to offer any opinion. 
Question 2: I consider the underlying principle of the plan embodied in the 
above bill the proper basis for compensation, so far as this company is con¬ 
cerned, but I believe that whenever additional service is asked for compensa¬ 
tion should be allowed for same. Question 3: I know of no more desirable 
plan than the one proposed, with the exception as noted in reply to question 2. 

Yours, truly, 

D. C. MacWatters, 

Vice President and General Manager. 


Kahului Railroad Co., 
Kahului, Hawaii, October 15, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. 0. 

Dear Sir: Your letter to Mr. Joseph P. Cooke, treasurer of the Kahului Rail¬ 
road Co., dated September 11, 1912, has been handed us for acknowledgment. 

We have given careful attention to the copy of Senate bill 7371 introduced 
by you, and embodying a plan recommended by the Post Office Department 
for determining the compensation to be paid to railroad companies for the 
transportation of the mails, and in reply to your questions would say that while 
we have no complaint to make as to the present plan of compensation which 
this railroad receives from the Government, we do think that the underlying- 
principle of the plan embodied in the proposed bill is a proper basis for com¬ 
pensation. 

Yours, very truly, Kahului Railroad Company, 

J. N. S. Williams, Superintendent. 


Kansas Southwestern Railway Co., 

Arkansas City, Kans., September 21, 1912. 

Hon. Jonathan Bourne, Jr., Chairman, 

Washington, D. C. 

Dear Sir: Your letter of the 11th inclosing copy of Senate bill 7371, and ask¬ 
ing for expression of opinion to three questions. 

It has been some time since I was familiar with the details of this subject, 
and in order that I may reply intelligently, it will be necessary to go over 
previous reports and House House docket No. 105 before making reply. 





54 


KAILWAY MAIL PAY. 


If after doing so I feel that I can give you any information, will gladly write 
you in reply to your interrogations. 

Yours, truly, E. L. Kingsbury. 


Keweenaw Central Railroad Co., 

Duluth, Minn., October 17, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir : T beg to acknowledge receipt of your circular letter of the 
11th ultimo, inclosing a copy of Senate bill No. 7371, as therein stated. I have 
carefully considered the proposed bill embodying tfie plan recommended by the 
Post Office Department for determining the compensation to be paid to railway 
companies for transportation of the mails, and. complying with your request, 
beg leave to answer the questions of your letter as follows: 

1. I do not consider the present plan of compensation altogether an equitable 
one as between the Government and the railroads. It is my understanding that 
the railroads are now unduly burdened with heavy expense in building and 
equipping mail cars required to meet the increasing demands and exacting con¬ 
ditions imposed by the Post Office Department for safety, etc., and the comfort 
and convenience of messengers, and that in consequence the railroads’ expenses 
incident to the mail service are increasing out of all proportion to the revenues 
earned. 

Also, under the present plan the minimum compensation allowed is too small 
for newly constructed lines struggling for existence in sparsely settled districts 
or in territory that is not largely enough populated to bring the mail weights 
above the minimum. 

2. The principle embodied in the proposed bill is not a proper basis for com¬ 
pensation, for the reason, among others, that it is absolutely impossible to 
determine the cost of transportation of any particular class of freight or people. 
The plan adopted by the Postmaster General and recommended in said bill for 
arriving at the cost to the railroads of handling the mails would produce an 
illogical and distorted result. It is impossible to determine with any degree of 
accuracy the actual cost of the particular service, and the same plan here pro¬ 
posed applied to all the business of the railroads would, in my judgment, 
promptly reduce them to bankruptcy. 

3. While the present plan of compensation may now be more nearly equitable 
to the large lines, it will not be equitable even to them in the near future when 
steel equipment throughout is demanded by the Post Office Department. Con¬ 
sidering, among other things, the efficiency of the service required by the 
Government and the public, and now furnished by the railroads, the rates of 
payment should be increased and not reduced, and the minimum should be con¬ 
siderably increased. 

4. Since the 1st instant the Keweenaw Central Railroad Co. has been carrying 
14 pouches a day, and is only receiving for transporting the mails $1,192.02 
per annum. If the proposed bill should become the law, and assuming that we 
were allowed the minimum compensation provided thereby of $25 per mile for 
the length of our line from Calumet, Mich., to Mandan, Mich. (28.1 miles), we 
would only receive for this service $702.50 per annum. This company is now 
operating passenger trains at a loss for the convenience of the few residents of 
Keweenaw and to enable them to receive regular mail service. Further reduc¬ 
tions in the compensation as contemplated by this bill would undoubtedly make 
it necessary for this company to abandon its passenger service. 

5. I desire to protest earnestly against the enactment of any such legislation 
as proposed, on the grounds that it will be impossible to ascertain the cost of 
the service as proposed; that the railroads will not be able to carry the mails 
under it except at a loss; that such a law will materially handicap new roads 
and the smaller lines like ours, and especially those serving sparsely populated 
districts; and, in general, that the necessary effect of any such legislation wiJl 
be to impair the present efficiency and high standards of the entire Railway 
Mail Service of the country and be greatly detrimental to the public and ail 
concerned. 

Respectfully, 


T. F. Cole, President. 



RAILWAY MAIL PAY. 


55 


Kushequa Route, 

Mount Jewett, Kinzua & Riterville Railroad, 

Kushequa Railroad, Mead Run Railroad, Smethport Railroad, 

Kushequa, Pa., September 23, 1912 . 

Hon. Jonathan Bourne, Jr., 

United States Senate, Washington , D. G. 

Dear Sir : Thanking you for your favor of the lltli instant, inclosing copy 
of Senate bill 7371, I have examined same and wish to reply to your three ques¬ 
tions as follows: 

1. I do not consider the present plan of compensation an equitable one. It 
is inequitable in that it practically compensates as liberally those railroads-, 
which, passing through thickly settled regions, have abundant earnings and 
frequent profitable passenger trains, so that they are put to very little expense- 
for transportation of mails; and those railroads which, passing through sparsely- 
settled regions, perform passenger and mail service at a loss to themselves, but; 
as necessary to the existence of the communities along their lines. It is unfair- 
to require free delivery by the railroad companies to terminal post offices re¬ 
gardless of distance. In our ca-se, the delivery from our terminal stations to- 
terminal post offices costs us nearly half as much as the total amount we receive 
for carrying the mails. 

2. The underlying principles which I observe in the proposed bill, i. e., ascer¬ 
tainment of costs by Postmaster General with appeal to the Interstate Com¬ 
merce Commission and more frequent adjustment of the rate of compensation 
would be a desirable improvement. The principle of the bill is defective in that 
it does not indicate the bases upon which the Postmaster General shall compute 
cost. It is also defective in not providing for compensation for carrying of 
pouched mails. In the case of our road, for instance, all mails are carried in 
mail pouches in the baggage compartment of our combination coach, there be¬ 
ing no separate car or portion of car devoted exclusively to mail service. I am 
pleased with that feature of the bill which takes the frequency of train service 
into consideration. I think that it is a mistake to make so low a minimum rate 
of compensation as “not exceeding $25 per mile.” In the case of short lines 
of road this would be a great hardship. 

3. A desirable plan for compensating for transporting the mails would be power 
on the part of the Postmaster General, subject to appeal to Interstate Commerce 
Commission, and in accordance with well defined rules, to ascertain both the cost 
and the value of the service rendered and base compensation accordingly. 
Among the rules for the guidance of the Postmaster General one should take 
into consideration the loss or profit of the train service on which the mails 
were carried; another, the length of line and cost of delivery of mails at sta¬ 
tions and termini; another the relation between the net weight of mail matter 
transported and the gross weight inclusive of pouches and cars or parts of cars 
transported for the purpose of carrying the mails. This latter would form a 
very practicable method of increasing the compensation in accordance with the 
needs of railroads passing through sparsely settled districts and yet endeavor¬ 
ing to give good service; for in such cases mails might consist of a few letters 
only to the pouch and many pouches, or of a mail car or mail compartment in a 
car transported through a long stretch of country which provided very little mail 
matter. Between large cities, where there is much mail to be transported, the- 
passenger traffic in the trains is apt to be profitable, so that the compensation 
for carrying the mails is practically surplus profit. And between such cities 
there is "usually one or more competing lines, any one of which could transport 
practically all the mail at a competing rate if allowed to bid for it. There is. 
a case on our road where the contents of one mail pouch does not average more- 
than one letter per day, and yet the prompt transportation of that one letter is 
almost vital to the success of the industries on which the busiest community on 
the line of railroad depends. The letter in question transports the day’s remit¬ 
tances to bank and arrangements with that bank to provide for the day’s 
requirements. 

I realize that you are a very busy man; but have endeavored to reply as 
intelligently as possible to the questions in your letter. 

Yours, respectfully, 


Elisiia K. Kane, President. 


56 


RAILWAY MAIL PAY. 


Lake Superior & Ishpeming Railway Co., 
Munising, Marquette & Southeastern Railway Co., 

Marquette, Mich., October 12, 1912. 


Hon. Jonathan Bourne, Jr.. 

Washington, D. C. 



Dear Str : Replying to yours of September 11 relative to Senate bill 7371, 
introduced by you by direction of the Senate Committee on Post Offices and 
Post Roads. I have to say that we have been furnished with a copy of the 
reply forwarded by the committee on railway mail pay and we fully indorse 
(he position taken by that committee. 

We believe that the short railroad should receive more than ordinary con¬ 
sideration on account of running through a sparsely settled country where the 
mail carried per mile is much lower than the average and the present rate of 
remuneration is not too high. 

Up to July 1, 1911, the Marquette & Southeastern Railway and the Munising 
Railway were two separate corporations, but were consolidated under the 
name of the Munising, Marquette & Southeastern on the above date. 

Document No. 105 shows the following results: 


Marquette & Southeastern, gain in mail revenue for one month_$134. 01 

Munising Railway, loss in mail revenue for one month_ 124. 87 


Net gain, Munising, Marquette & Southeastern Ry 


9.14 


And this compilation does not take into account the investment in one extra 
compartment car which we must keep in reserve for emergencies. 

As the reply forwarded by the committee on railway mail pay goes into all 
matters in general, I will not touch on any of the details of a short-line 
railroad except as above stated, that due consideration should be given to 
(hat service as being different from service performed by other railroads. 

Yours, truly, 


H. R. Harris, General Manager. 


Lancaster & Chester Railway Co.. 

Lancaster, S. C., October 2. 1912. 

Hon. Jonathan Bourne, Jr.. 

Washington, D. C. 

Dear Sir : Replying to your letter of the lltli I am inclosing you a letter 
that I recently wrote to the Assistant Postmaster General, at Washington, re¬ 
garding the compensation allowed the Lancaster & Chester Railroad Co. for 
hauling mail and mail car. This will fully explain our position. I contend 
that it is not fair to put short-line railroads on the weighing basis owing to 
the fact that they are generally run from one important town to another, and 
when main lines of railroad are running through both of these towns they 
only get to haul local mail, getting no through mail, while they have to 
perform all the services required by the Government. The compensation 
allowed short lines is arbitrary, unjust, and unfair. In my opinion the com¬ 
pensation should be allowed on a basis of the service rendered irrespective 
of the amount hauled, except on main lines. 

This rule applies as regards rural mail carriers and I can see no reason 
why short-line railroads should be arbitrarily required to render the service on 
a basis that is not remunerative. Thanking you for your inquiry, I am, 
Yours, very truly, 

Leroy Springs, President 


September 13. 1912. 

Hon. Joseph Stewart, 

Second Assistant Postmaster General, Washington, D. C. 

Dear Sir: Effective July 1 you changed your method of determining compen¬ 
sation for the handling of mail by the Lancaster & Chester Railway Co., which 
operates between this point and Chester, S. C., and of which I am president. 
This cuts our remuneration down to about $1,000. It is necessary that we fur¬ 
nish a mail car to conform to your rules and regulations and also give free 
transportation to your mail clerk, and the amount you now propose to pay us 








RAILWAY MAIL PAY. 


57 


not only does not allow any rent for the car we supply but pays us scarcely 
2 cents a mile for hauling your clerk. , I do not think the Government ought to 
expect a short-line railroad to perform this service without fair remuneration, 
and I do not believe you realize the imposition on our railroad under the cir¬ 
cumstances. 

Do you realize that you are requiring us to give you regulation service on 
trains twice each day between here and Chester for a sum less than you pay 
one of your rural carriers per annum? I do not question that the expense 
entailed in transporting mail between Lancaster & Chester nets the Govern¬ 
ment a loss, but the service has to be performed just as in the case of unprofit¬ 
able R. F. D. routes, but in your case you have other lines which are profit¬ 
able and which counterbalance this loss. In our case our only source of revenue 
from the Government is in handling this mail, and just because the line is not 
profitable to the Government is no reason to my mind why you should ask it to 
be unprofitable to us. 

If the service were performed by rural carriers it would be at an expense 
three or four times as great as at present and the service would be from three to 
five hours later. If we transported through mail between these two points our 
income would be considerable and enough to pay us for the facilities we supply, 
but in view of the fact that the trunk lines reach both Chester and Lancaster 
ahead of our line the only through mail we handle is for intermediate points, 
which is of little consequence. 

Under the ruling of the United States Supreme Court we understand it is 
optional whether we perform this service or not, and unless you can arrange 
to give us a fair income for the service we are perfoming we must in fairness 
to ourselves decline to continue handling mail. We therefore respectfully serve 
notice on you now that from this date until a satisfactory adjustment of this 
subject is reached we handle all mail of the Lancaster & Chester Railway Co. 
under protest. It is not the fault of this road that the mail is not of greater 
volume, and the service we render is just the same as if it were ten times as 
great, and we could handle ten times as great volume at absolutely no addi¬ 
tional expense over our present cost. 

I trust you understand the spirit in which I have placed this subject before 
you. We have no desire to be in the least arbitrary, but it is simply an injus¬ 
tice to our railroad that we should have to perform a service at a loss which 
should show a fair income for the trouble and expense we are pur to. Our 
Congressman, Mr. D. E. Finley, who is a member of the Post Office Committee, 
is familiar with the situation, and if you wish further information upon the 
subject I suggest that you take it up with him. 

We trust you will handle this with promptness, so that we may have it satis¬ 
factorily adjusted at no distant date. 

Yours, very truly, Leroy Springs, President. 


Leavenworth & Topeka Railway Co., 

Emporia, Kans., October 22, 1912. 

Hon. Jonathan Bourne. Jr., 

Washington, D. C. 

Dear Sir: Yours of September 11, inclosing copy of Senate bill 7371. 

As the Leavenworth & Topeka Railway Co. is being operated by the Atchison. 
Topeka & Santa Fe Railroad Co. I take it that Vice President George T. Nichol¬ 
son’s letter of October 17 to you on the subject will give you the information 
called for in your letter of September 11. 

Yours, truly, C. T. McLellan, President. 


Lor am a Railroad Co., 
Pennsboro, W. Va., September 1), 1912. 

Hon. Jonathan Bourne, 

Washington, D. C. 

My Dear Sir: I beg to acknowledge receipt of copy of your Senate bill 7371, 
which you were so kind to send me. 

To be frank with you, I must say that I would be very sorry to see this 
bill become a law. It would work a great hardship on all small roads to com¬ 
pel them to perform a task at a loss of money. This being in violation of the 
spirit of the Constitution the courts would relieve, blit the expense of defense 
would work loss anyway. 




58 


RAILWAY MAIL PAY. 


We liave operated 9 miles of narrow-guage road for years over which the 
United States mail is carried for a very significant sum, if one did not care 
what he said. We carry it for $40.28 per month. We pay $5 per month for 
delivery to post office, which leaA'es ns $35.28 per month, to say nothing of the 
fines and reductions. In the last three years we have extended this road 5 
miles to town of Pullman, and we refused to carry the mail over this part of 
road because of the poor pay. The Government offered us $20.83 per month and 
we would have to pay $15 per month to make delivery from depot to post office, 
which would leave $5.83. We refused and did and do not carry over this part 
of road. We would get, if we carried mail, clear $41.11 per month for carrying 
mail four times a day 14 miles, while a rural carrier gets $75 per month for 
carrying once a day on a mule. 

The small roads should be excepted from your bill. I believe you will, be¬ 
cause in your effort to benefit the Nation you would not confiscate any citizen’s 
property. Would you? 

Truly, yours, M. K. Duty, 

President, Lorama Railroad Co . 


Louisville & Nashville Railroad Co., 

Louisville, Ky., December 30, 1012. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir : Your favor of September 11, 1912, relative to the compensa¬ 
tion to be paid to railroad companies for transportation of the mails, in which 
you made certain inquiries in regard to the present plan and the plan recom¬ 
mended by the Post Office Department, was duly received. 

Inasmuch as the committee on railway mail pay, representing 214,275 miles 
of railway in the United States, operated by 268 companies, prepared and sub¬ 
mitted a comprehensive statement containing facts and figures going to show 
that the present compensation does not equal the operating expenses incident 
to the transportation of the mails, and, therefore, leaves nothing for return 
upon the value of the property employed, I concluded that it w T ould be best to 
subscribe to the statements of the committee and not inflict a lengthy inde¬ 
pendent argument upon you. 

I heartily indorse the statement of the committee as set forth in the pam¬ 
phlet entitled, “ Mail Carrying Railways Underpaid,” believing it to be an 
absolutely accurate presentation of the fact that the present system is grossly 
unfair to the railroads. 

It has occurred to me, however, that you might be interested in the facts 
and figures concerning specific cases on this company’s lines where the existing 
laws or the Post Office Department’s methods of applying them result in in¬ 
equity. I therefore inclose herewith memoranda as follows: 

1. Cost of handling mail to and from post offices at various points. 

2. Mail compensation earned by mail apartments July 1, 1902, to June 30, 
1912. 

3. The effect of quadrennial mail weighings and adjustments of mail pay as 
compared with annual adjustments. 

The compensation of the Louisville & Nashville Railroad Co. was last fixed 
for the quadrennial period commencing July 1, 1912. The tonnage of mail mat¬ 
ter will be enormously increased on the 1st proximo w^hen the parcel post 
will be inaugurated. The weight will gradually increase as the parcel post 
grows in favor, as will undoubtedly be the case. It follows, therefore, that 
unless Congress comes to our relief we will be called upon to perform a very 
great and valuable service for a period of three and one-half years without any 
compensation. Under conditions such as have existed heretofore the quadren¬ 
nial basis is manifestly inequitable, because the measurement of the compen¬ 
sation wholly disregards the normal annual increase which is inevitable, but 
under the burden of the parcel post this inequity will be greatly multiplied. 

The result of the recent weighing on the Louisville & Nashville Railroad for 
54 of our 59 mail routes was as follows: 


Pay per annum June 30, 1912_$759, 943. 22 

Pay per annum July 1, 1912___ 801, 626. 71 

Increase per annum_•__ 41, 683. 49 








RAILWAY MAIL PAY. 


59 


Based upon the reasonable assumption that the increase in the amount of 
mail handled was fairly regular during the last four years, annual weighings 
and readjustments of pay would have resulted in our receiving one-fourth of the 
increased rate now shown, or $10,420.87, for three years; another one-fourth 
for two years, and another one fourth for one year, making a total of $62,525.22 ; 
but, under the quadrennial arrangement, we carried the increased amount of 
mail up to June 30, 1912, without receiving 1 cent additional compensation. 
You can readily appreciate what an injustice will be imposed upon the Louis¬ 
ville & Nashville Railroad Co. during the next three and one-half years if it 
is not allowed adequate additional compensation for the large volume of par¬ 
cel post matter. 

If the above should suggest any inquiries I shall be pleased to answer the 
same. 

Yours, truly. M. LI. Smith, Jr., President. 


Memorandum as to Cost of Handling Mail to and from Post Offices at 

VARIOUS POINTS. 

At Pensacola, Fla., the distance between the station and post office, 0.73 of a 
mile, is included in and paid for as a part of two routes, because it is a termi¬ 
nal of those routes. On route No. 123003, Pensacola and Flomaton, the amount 
of compensation is $92.87 per annum, being at the rate of $127.22 per mile for 
0.73 mile. On route No. 123015, Pensacola and River Junction, the amount of 
compensation for the service between the station and post office at Pensacola 
is $82.88 per annum, being at the rate of $113.54 per mile for 0.73 mile. The 
total of these two amounts is $175.75. As the amount of mail is quite large 
and there are quite a number of trains to be met, for some of which two trips 
have to be made, bringing advance mail and final dispatch from the post 
office, it is necessary to have first-class wagon service. This work is let by 
tender, and we are now paying $75 per month, or $900 per annum, for the 
service, so that we actually lose $724.25 on that part of the mail routes. 

At Columbia, Tenn., on route No. 127017, Columbia and Sheffield, we receive 
for the terminal service between the station and the post office $44.12, being 
at the rate of $73.53 per mile for 0.6 mile. It costs us $120 per year to have 
the service performed. 

At Frankfort, Ivy., on route No. 129050, we receive $22.44 per annum for 
the terminal service, being at the rate of $64.12 per mile for 0.35 mile. The 
service costs us $96. 

At Gallatin, Tenn., on route No. 127026, we receive for terminal service 
$20.33 per annum, being at the rate of $52.15 per mile for 0.39 mile. It costs 
us $180 to have the service performed. 

At McLeansboro, Ill., on route No. 135078, we receive for the terminal service 
$20.94, being $42.75 per mile for 0.49 mile. The service costs us $84 per annum. 
At this point a condition prevails which looks ridiculous, but is not uncommon 
under the postal regulations. While this company is responsible for the han¬ 
dling of mail between the post oflice and trains on route No. 135078, the Post 
Office Department has to pay for the handling of the mail to and from the 
trains on route No. 135032, East St. Louis and Evansville, because McLeans¬ 
boro is an intermediate point on that route, and the post oflice is located more 
than SO rods from the station. The fact that the Government employs the 
mail messenger at that point enables us to make contract with the same man 
at a comparatively small figure; but, even at this, the service costs us more 
than four times the amount received. Among the junction points where similar 
conditions prevail are Frankfort, Columbia, and Gallatin, shown in preceding 
paragraphs. 

At Scottsville, Ky., on route No. 127026, we receive for the terminal service 
$23.46 per annum, and it costs us $144. 

At Adairville, Ivy., on route No. 129014, we receive for the terminal service 
$31.60, and it costs us $96. 

Paris, Ivy., is an intermediate point on routes 129002 and 129015; but as the 
distance between the station and post office is slightly less than 80 rods, we are 
responsible for the handling of the mail to and from the post office. As the mail 
is heavy and there are a great many trips, wagon sem ice has to be provided, and 
the smallest amount for which we could get a contractor to undertake this 
work was $480 per annum. Of course we get no compensation directly for this 
service, as the side distance to the post office is not included in the length of the 



60 


RAILWAY MAIL PAY. 


route. If the post office was about 70 yards farther away, this service would 
have to be provided for by the Post Office Department, and we would not suffer 
any reduction in revenue, but would save the $480 per annum. 

Other instances might be given, but the above ought to be sufficient to empha¬ 
size the arguments that the performance of terminal and side-messenger service 
is not a reasonable requirement, and that if the carriers are required to perform 
such service it should be paid for at rates much higher than is paid for trans¬ 
portation on trains. 

Memorandum Illustrating the Effect of Quadrennial Mail Weighings and 
Adjustments of Mail Pay, as Compared With Annual Adjustments. 

Complete figures are not at present available showing the results of the 
mail weighing this year on the larger portion of the Louisville & Nashville sys¬ 
tem, and the Post Office Department has succeeded, by economical methods in 
connection with mail-bag equipment and in other ways, in holding down the 
amount of mail, so that it seems unlikely that any very great increase will be 
shown over the figures of 1908. 

The adjustment effective July 1, 1908, under which we have been working 
up to June 30, 1912, showed a net increase on the routes weighed of $12,618.70 
per annum, as compared with the rates in effect prior to that time. This was a 
very small percentage of increase as compared with increases shown in previous 
quadrennial periods, because the department had already commenced to apply 
its economical methods, and, by the Postmaster General’s order No. 412, chang¬ 
ing the divisor from six to seven days per week in arriving at the average weight 
carried, had succeeded in reducing the compensation about one-seventh. 

It is only reasonable to assume that the increase in the amount of mail which 
justified the increase in pay of $12,618.70 per annum, took place gradually 
during the four years intervening between the weighing in 1904 and the weighing 
in 1908, or, say, about one-quarter of the increase in each year, so that, if we had 
had annual weighings and adjustments instead of quadrennial, the increase in 
pay at the beginning of the second year—July 1, 1905—would have been $3,- 
154.67, which we would have received for three years. At the beginning of the 
third year—July 1, 1906—there would have been a further increase of $3,154.67. 
which we would have received for two years, and at the beginning of the fourth 
year—July 1, 1907—a further increase of $3,154.67 for that year. In other 
words, we would have received $18,928.05 for carrying an increased amount of 
mail each year, but which, under the quadrennial weighing system, we actually 
carried for nothing. 


Memorandum Showing Mail Compensation Earned by Mail Apartments, 

July 1, 1908, to June 30, 1912. 

All the following statements with reference to the amount of compensation 
credited to particular trains are based directly on statistics furnished by the 
Post Office Department and may be easily verified. They refer throughout to 
the quadrennial contract period of 190S-1912, because similar figures are not 
yet available for the adjustment which is now being made, effective July 1. 
1912. 

Route 12900Jt, Cincinnati and Nashville .—Train 10. Bowling Green to Louis¬ 
ville. On September 12. 1904, the Railway Mail Service people called for a 
mail apartment for this run not less than 16 feet long. The results of the mail 
weighing of 1908 showed that train No. 10 carried only 0.41 per cent (0.41 of 
1 per cent) of the total weight carried over the route, which made the com¬ 
pensation $1.81 per trip. There is no postal clerk service in this car south¬ 
bound on No. 9, but a small amount of mail is handled by our baggage-master. 
However, this amount of mail was so small that in the percentage sheets fur¬ 
nished by the Post Office Department it was disregarded entirely, and no com¬ 
pensation whatever credited to train No. 9. Therefore we have for some years 
been handling what is practically one-thircl of a car, fitted up as a traveling 
post office, with mail and the postal clerk, from Bowling Green to Louisville 
for 1^ cents per mile run, or less than the fare of the clerk would amount to, 
and so much less than one-third of the average cost of maintaining and hauling 
the car in a passenger train that such a comparison is ridiculous. As we have 
.to handle the apartment southbound without any compensation, we really only 
get about three-fourths of a cent per mile for the service. 



RAILWAY MAIL PAY. 


61 


Route 129008, Memphis Junction and Memphis. —Train 109, between Bowling 
Green and Clarksville, carries only 0.63 per cent of the total mail on the route, 
which makes the compensation for that train only $1.25 per trip. The cor* 
lesponding figures for train 110 are 0.41 per cent of the total weight; compensa* 
tion, 81 cents per trip. We handle a mail apartment 18 feet 6^ inches long, 
with equipment, mail, and one of two postal clerks, at an average rate of 1.74 
cents per mile for the round trip. 

lor train 10<, from Paris to Memphis, the corresponding figures are 0.67 per 
cent of total weight; compensation, $1.33 per trip. Train 108, Memphis to 
Paris, 0.S7 per cent of total weight; compensation, $1.72 per trip. The mail 
apartment is 11 feet long, and the average pay for round trip is 1.17 cents per 
mile. Train 106, Memphis to Milan, handles only 0.25 per cent of the total 
mail on route, which makes the compensation only 58 cents per trip, or 6 mills 
per mile. There is no postal clerk service in this apartment southbound. 

Route 127006, Nashville and Montgomery. —Train No. 5, Decatur to Bir¬ 
mingham, carries 0.37 per cent of total weight; pay per trip, 80 cents. Train 
No. 6, Birmingham to Decatur, carries 0.78 per cent of total weight; pay per 
trip, $1.70. The pay for the 12 foot 8 inch apartment for the round trip is 
1.45 cents per mile run. 

Route 129059 and route 129031.— Trains 69, 70, 41, and 46, making round trip 
between Evansville, Earlington, and Providence, a total of 148.76 miles, earned 
only $1.68, or 1.13 cents per mile run, or less than half fare of the postal clerk 
when traveling on duty. It should be noted that this postal-clerk service has 
recently been discontinued. 

Numerous other instances might be given in detail where the total mail com* 
pensation earned by small mail apartments figured out less per mile run than 
the fare of the clerk or clerks traveling in such apartments. In addition to 
carrying the clerks while on duty we have to carry them as passengers to and 
from their, homes without compensation and have ta assume full responsibility 
for any injuries received while on our trains. 


Linea Ferrea del Oeste, 

San Juan, P. R., September 23, 1912, 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir: In reply to your letter of September 11, I beg to state that 
your mail is carried over this route by a ferryboat and a train. 

No other company runs its trains over our tracks and only one crossing is 
made, near Bayamon, with the tracks of the American Railroad. The post 
offices are located nearer to the railroad station than to any other point on the 
track. 

In regard to your three questions, I beg to answer them as follows: 

1. I think the plan of compensation is equitable, though considering the small 
amount of mail carried in this country, 6 per cent profit on the expenses is com¬ 
paratively small. 

2. I think the underlying principle of the plan is on proper basis for com-, 
pensation. I, however, believe that as far as fines for lack of equipment is con¬ 
cerned, the Postmaster General should not be as strict as with railroads in the 
States, where purchasing facilities are at hand. 

Very respectfully, yours, R. Valdes, 


Long Island Railroad Co., 

New York, November 15, 1912, 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Senator: The Long Island Railroad is a good illustration of under¬ 
payment for carrying the United States mails, and I will, therefore, submit 
seine of the facts as briefly as possible with the purpose of helping your com¬ 
mittee to understand why the existing laws are inadequate to do justice and 
of suggesting the direction in which remedial measures should'be applied. The 
Post Office Department, in Document No. 105, states that in November, 1909, 
the company’s revenues for carrying the mails were about 28 per cent below the 
mere cost of operation and taxes, and if the Post Office Department had extended 
its estimate to include fixed charges, it could have conceded a loss to the rail¬ 
road of over 80 per cent. The company’s calculation on the same data revealed 
a greater loss, about 200 per cent., or about $85,000 a year. 




62 


RAILWAY MAIL PAY. 


EXTENT AND CHARACTER OF MAIL SERVICE. 

Long Island, as you know, is a section of New York State, extending from 
New York City to Montauk Point, about 125 miles long, 15 to 22 miles wide, 
and has a population of over 2,000,000 people. The Long Island Railroad is 
practically the only transportation agency and, therefore, carries all of the 
United States mails for the entire section. 

The mail service on the Long Island Railroad includes the following: 


Number of mail routes_ 12 

Total length of mail routes_miles_ 344 

Post offices supplied_ 188 

Railway post-office trains daily_ 38 

Total mail trains daily_ 254 

Total of average weights of mail daily_pounds_16, 028 

Annual pay received in 1911-$43, 949 


In addition to the transportation of the mail on over 250 trains daily, it will 
be noticed that the company furnishes railway post offices in mail apartments 
(15 to 30 feet in length) on 38 trains daily. It also provides extensive space in 
the Long Island City terminal for post-office work, without rent, carries the mail 
between the trains and the post offices at many stations, carries a large number 
of railway postal clerks and postal officials free, and performs other incidental 
services. 

We are required to furnish a special electric baggage car to move the mails 
between Long Island City and the publishing house of Doubleday, Page & Co., 
at Garden City, a distance of 20 miles. This movement amounts to several 
thousand pounds a day, but the railroad company receives absolutely nothing 
for performing this service, because it was inaugurated after the weighing of 
1909. 

HIGH QUALITY OF THE SERVICE IGNORED. 

If we divide the annual mail pay ($43,949) by 365 days and then again by 
344 miles, we find that the company receives about 35 cents a day per mile of 
road for carrying an average daily weight of mail of 16,000 pounds, or 8 tons. 
If all of the 12 mail routes were in one straight line, 344 miles in length, and if 
the daily weight (8 tons) were carried on one train, compactly loaded like 
freight, the rate of pay would be moderately remunerative if tiie work was 
merely the transportation of the load and did not include the other services 
described above. 

Further, if the company operated only one train a day each way and the Post 
Office Department refrained from calling for extra car space for railway post 
offices, thus permitting the whole mail to be consolidated within one car or less, 
the pay of the company under the present law would be the same as at present. 
The very life and efficiency' of the postal service depends upon expedition, in 
which frequency of transmission is a very large factor; yet the 254 daily mail 
trains (varying on the different routes from 5 trains daily to 74 trains daily) 
obtain no particular recognition in the law. The frequency of service is, how¬ 
ever, a substantial factor in the cost of doing the work, because the load to be 
carried is divided into retail lots with consequent increase of expense. 

The present terminal of mail-car runs is Long Island City, which involves 
wagon service via Thirty-fourth Street Ferry, with greatly increased cost and 
delay. 

With the completion of the new post office at the Pennsylvania Station in 
New York City, this company can extend its mail routes direct to the post office, 
making that the terminal for all mail-car routes, greatly expediting the move¬ 
ment and eliminating the cost of wagon service. But we must be paid for this 
service on a proper basis instead of the miserable sum of $600 offered by the 
Post Office Department for a high-class service of 10 steel mail apartment cars 
per day through the East River tunnels to the $50,000,000 station in the heart of 
New York, where it costs us for electricity, wages, and ordinary expense over 
$2 for every car moved into and out of the terminal, without adding for rent and 
taxes. We should have at least $15,000 per annum for making the new post 
office the terminal of the Long Island mail service, in addition to pay for 
handling mail via new electric routes at the usual rates for service of that kind. 
This matter is one now under discussion with the Post Office Department. The 
local officials of the department recognize the great benefits which the depart¬ 
ment will secure through the operation to the Pennsylvania terminal, and agree 









RAILWAY MAIL PAY. 


63 


that the railroad company must he paid for it; but the regulations of the de¬ 
partment are so narrow and unfair that it seems impossible for us to get to¬ 
gether. The public suffers through such conditions, and the department is 
unable to take advantage of the new facilities. 

MAXIMUM FACILITIES FOR MINIMUM PAY. 

The geographical situation of Long Island with the Long Island Sound on 
the north and the Atlantic Ocean on the east and south, accounts for the fact 
that the heavy load of mail starts from the western terminal at New York City 
and rapidly diminishes as it travels eastward to the vanishing point. Similarly, 
going westward there is naturally only a moderate accumulation of mail until 
trains near the metropolitan district. Therefore, the facilities, and especially 
car space, must be reserved and set aside for the maximum load of the heaviest 
season, while the law prescribes payment for the average weight carried. The 
average is a very lean average; first, because of the geographical conditions 
noted aboA e; second, because the Post Office Department selects a period for 
weighing believed to be below the normal for this road; third, because since 1007 
the Post Office Department includes Sundays in the computation, although very 
little service is required or performed on our line on Sundays, instead of con¬ 
fining the test period to working days, as stated in the law: and fourth, because 
the average weight when determined is kept stationary for four years, regardless 
of any increased business accumulating in the meantime. 

RAILWAY POST OFFICES'—SORTING MAIL EN ROUTE. 

It surprises one after he takes up the study of the subject of the transporta- 
tion of mails to discover that the transportation has been superseded in rela¬ 
tive importance by the traveling post offices carried over the road several 
times daily, in which railway postal clerks open the mails and do a general 
post-office business. It was suggested above that the entire daily lead of 8 
tons could be economically transported in half of one car on one train so far 
as the weight is concerned. In contrast with this please note the fact that the 
Post Office Department uses 38 railway post offices daily on our line, in which 
the car space devoted to the mails aggregate about 800 linear feet, or the 
equivalent of 13 full cars 60 feet in length. The law of 1873 prescribes a rate 
of pay for a certain average daily weight on the condition that the mails 
are carried with “ due frequency and speed,” and that suitable and sufficient 
room, fixtures, and furniture in a car or any apartment properly lighted and 
warmed shall be provided for route agents to accompany and distribute the 
mails. Since then the distribution en route has greatly increased, and there 
is no limitation restricting the Postmaster General as to frequency of service or 
the size and number of apartments. The car space for railway post offices 
can easily be recognized as the main factor at present on our lines, while the 
weight of mail transported is an uncertain and inadequate measure upon which 
the pay is based, but holding a very inferior relation to the car space demanded 
by the Post Office Department or provided by the railroad company. 

THE PAY RELATIVELY LESS FROM YEAR TO YEAR. 

During the past 15 years the wealth and commerce of the country and all 
business activities have increased to a remarkable extent. The same can be 
said of all branches of the Long Island Railroad business except the mail pay. 
In 1897 the annual rate of mail pay was $40,982.40, and in 1911 it was 
$43,949, an increase of less than 8 per cent in 14 years. In the same period 
the other items of Long Island Railroad business increased as follows: 

Per cent. 


Earnings from passenger service-209 

Earnings from freight service-1T8 

Earnings from express service-201 

Operating expenses----219 

Taxes_235 

Fixed charges- 210 


It is not necessary to comment on this obvious disparity, except to say that 
we estimate that the apartment-car space devoted to railway post-office pur¬ 
poses increased about 100 per cent during this period, while the mail pay was 
raised only 8 per cent. It can be conservatively claimed that the accumulated 
shortage in our mail pay for the period of 14 years was over a million dollars. 








64 


KAILWAY MAIL PAY. 


CONCLUSION. 


The remedial amendments to tlie present laws suggested in the response to 
you from the committee on railway mail pay are indorsed by our own experi¬ 
ence and study. Pay for mail-apartment cars is the principal need for the 
Long Island Railroad, if the other provisions of the laws remained unchanged. 
An allowance for the side messenger service and terminal messenger service 
performed by the company would be only equitable. Annual weighings of 
mails with annual radjustments of pay are vitally important for many rail¬ 
roads, and are indispensable to all now that the parcel post is about to be 
0 sto blished 

If the deficit in our mail pay as compared with operating cost and taxes 
as ascertained in November, 1909, be expanded to include an allowance for fixed 
charges, the resulting figures would be $95,765.75. If this deficit were to be 
equalized by an allowance of pay for mail apartments, the rate would need to 
be based on 8 mills per car-foot mile. Therefore, the annual rate per mile 
of route for a round trip daily of mail-apartment cars, in addition to the pay 
for weight of mails carried, would be approximately: For 30-foot mail apart¬ 
ment, $87.60 per mile per per year; for 25-foot mail apartment, $73 per mile 
per year; for 20-foot mail apartment, $58.40 per mile per year; for 15-foot mail 
apartment, $43.80 per mile per year. 

The General Government in the maintenance of the Post Office Department 
is performing a social and commercial service for the public; so also the rail¬ 
roads in carrying passengers and freight are performing a very essential and 
important social and commercial service. The establishment of the parcel 
post emphasizes the commercial aspect of the postal service. The traffic should 
render a fair return to those engaged in the service whether as postmasters, 
clerks, letter carrirs, or as railroads. Viewing the national postal system as a 
whole, the railroads constitute not only the framework of connection for the 
whole structure, but in addition provide and operate the motive power for 
intercommunication between all of its parts. Its importance should be duly 
recognized and its work should be fairly compensated. 

Very truly, yours, 


Ralph Peters, President. 


Louisiana Railway & Navigation Co., 

Shreveport, La., September 19, 1912. 

Mr. Jonathan Bourne, Jr., 

Washington , D. G. 

Dear Sir: I have your letter of September 11 and copy of Senate bill 7371, 
embodying apian for determining the compensation to be paid to railroad com¬ 
panies for transportation of mails. 

The roads that are the least able to comply with the present governmental 
requirements are those who draw the minimum amount of compensation, and 
whose cost for handling per 100 pounds is far greater than those drawing maxi¬ 
mum pay. 

Under this bill the minimum amount of payment is reduced from $42.50 per 
mile per annum to $25, which will be a great hardship to the roads who need a 
proper compensation in the sparsely settled sections of the country that they are 
developing largely at their own expense. Local conditions can not well be 
taken into consideration in fixing the compensation under this arrangement. 
The Postmaster General will of necessity adopt certain rules which he will 
pursue in determining the cost of handling. In the adoption of these rules, 
local conditions will be ignored; in other words, those most able to handle 
cheaply would probably be overcompensated, whereas in using this method 
those to whom the expense is greatest will be underpaid. It is true, oppor¬ 
tunity is afforded to appeal the apportionment to the Interstate Commerce 
Commission, but they, like the Postmaster General’s department, will also be 
guided of necessity by certain rules and standards. 

In our own case, for example, this line of 350 miles was entirely built by one 
man, he furnishing the entire capital for the project; no outside investors have 
been called upon to help bear the burden, and beginning about 14 years ago, 
many millions of dollars have been invested up to the present time. The results 
of this has been that a country all the way from west Louisiana to New 
Orleans has had its value increased several hundred per cent. Each individual 
along the line is worth considerably more because of his investment; the great 
convenience to this population, who previously depended upon the irregular 



RAILWAY MAIL PAY. 


65 


steamboat service or the mail coach for their mails, is worth thousands of 
dollars to them through the handling of the mails along this line, and yet in 
all this time the investor of the millions tied up in this road has received no 
benefit whatever in the way of interest on his investment. 

In computing the cost under the rules of the Postmaster General, the proba¬ 
bilities are that only cost of transportation or operating service would be con¬ 
sidered, and yet it seems but fair that the proportional amount of loss through 
operating for years for the convenience of the public at large should be borne 
by the public. In other words, in conditions of this kind a 6 per cent added to 
the actual transportation or operating costs would not be fair compensation. 

For many years, owing to the thinly settled condition of the country, the 
weight of mails carried did not, under the old law, justify the payment of more 
than the minimum mileage, and had this bill been in effect during that time 
the proprietor’s loss would have been increased to the extent of the difference 
between the minimum in the present bill and that of the one now’ in effect. The 
bill seems to authorize the Postmaster General to carry mails on any train— 
freight or passenger—and to allow T the ordering of mail service on freight trains 
after compensation has been fixed without additional payment. 

We are now hampered in our operations to some extent by carrying mails 
on freight trains, and the public alw’ays free to expect and demand the best 
of service from a railroad company, even though privately owned, make no 
distinction nor no allowance for the failure of such company to provide their 
requirements with any profit to itself. This bill gives authority to the Post¬ 
master General to fine the roads for failure to perform the service—even as 
high as three times the value of such service. 

Local conditions would have a great bearing on this phase of the matter. 

Under the old law’, w hile roads w r ere being fined for delayed trains this com¬ 
pany, with its new line operating in seasons of extreme rainfall, w r as held up 
to the same standard that was expected and required of the Pennsylvania or 
the New York Central, even to such an extent that in some cases, out of a 
quarterly payment of $2,300. as much as $700 w T as deducted on this account. 

The requirement under certain conditions with certain roads, at certain 
times, is unreasonable, and such roads would be far better off if they w 7 ere not 
handling the mails at all. In addition to this, in the near future a road such 
as ours, even yet before it begins to be a profitable investment for its builder, 
will be required to supply a new 7 set of equipment under the Government rules. 
This equipment will be of no benefit whatever to the railroad except for han¬ 
dling the mail, and if proper compensation is not received would be simply an 
added loss. The Government, through its power to do so, is imposing upon 
the builder of this line, as the G per cent added to operating costs would not by 
any means, even though all costs should be included, justify the outlay of 
many thousands of dollars in order to provide a certain class of equipment. 

It therefore seems to me that the minimum compensation should not be re¬ 
duced ; that some provision should be made for extra compensation to new and 
nonprofitable roads, and that local conditions should be considered in fixing 
compensation and a higher rate of cost per mile allowed to those roads han¬ 
dling a small tonnage of mail than is allowed in the case of the larger lines. 

Yours, truly, 


H. B. Helm, Second Vice President. 


Milner & North Side Railroad Co., 

Milner, Idaho , November 2, 1912, 

Jonathan Bourne, Esq., 

Washington. />. C. 

Sir: Replying to yours of September 11. relative to Senate bill 7371, in 
reply to— 

Question 1. Would say that I consider the present plan is equitable between 
this company and the Government. I have no figures as to other classes of 
railroads, and am. therefore, not competent to offer any opinion. 

Question 2. I consider the underlying principle of the plan embodied in the 
above bill the proper basis for compensation, so far as this company is con¬ 
cerned; but I belie;e that, whenever additional service is asked for, compensa¬ 
tion should be allowed for same. 

Question 3. I know’ of no more desirable plan than the one proposed, with 
the exception as noted in reply to question 2. 

Yours, truly, D. C. MacWatters, 

Vice President and General Manager. 

5 


74972—13 




66 


RAILWAY MAIL PAY. 


Maryland & Pennsylvania Railroad Co., 

Baltimore, M<L, October 16, 1612. 

Hon. Jonathan Bourne, 

W(iHliin<jton, I). C. 

Dear Sir: In your circular letter of September 11 last you propound three 
questions which I will endeavor to answer concisely. 

Question 1. Do you deem tlie present plan of compensation an equitable one 
as between the Government and the railroads, etc.? 

Answer. The present plan we deem inequitable: 

( a ) The present rate of $75 per mile per annum for 500 pounds is only 
about 5 cents per 100 pounds per mile, for which the railroad not only trans¬ 
ports the mail but. in addition, a passenger on an apartment specially fitted up 
for that purpose—a miniature post office—and which can be used for no other 
purpose. Especially can this be said of short lines on which tlie department 
pays nothing for the office on wheels which it requires. 

\b) It is difficult to appreciate the equity of the department’s paying for a 
whole car where such is used and declining to pay anything for a portion of a 
car fitted up in exactly the same manner. 

(c) The service is burdened with deliveries which, on some routes, consume a 
large portion, if not all, of the compensation received by the railroad. 

Question 2. Is the underlying principle of the plan embodied in Senate bill 
7371 a proper basis for compensation, etc.? 

Answer. The plan for compensation embodied in this bill is to allow the rail¬ 
roads an amount “ not exceeding the cost to the railroads of carrying the mail, 
as ascertained by the Postmaster General, and 6 per cent of such cost.” This 
appears to be a new method of conducting business, and one which would prove 
disastrous in most, if not all, lines of trade. 

A contractor who furnishes no money and assumes no risk usually receives 
more than 6 per cent on cost for supervision alone. 

Solvent railroads require at least 30 or 40 per cent of their gross revenue to 
keep them afloat and pay a reasonable return on their capital. This repre¬ 
sents not 6 per cent but 50 to 00 per cent of their expenses or cost of earning 
their money. 

Moreover the bill does not require the Postmaster General to pay to tlie 
railroad the cost plus 6 per cent. This is a maximum beyond which he may not 
go, and what he shall pay within this is left wholly to his discretion. You will 
kindly note that what is sometimes called an appeal to the Interstate Commerce 
Commission has no bearing upon the question of what the Postmaster General 
shall pay within this maximum of cost plus 6 per cent. For that procedure 
if an appeal at all is only upon his method of ascertaining the cost so that 
even should the commission decide against him he accepts its findings as to the 
cost, yet still with full discretion as to the compensation, within the maximum, 
which he will offer a railroad. And when he has made the offer the railroad, 
under the last provision of the bill, is bound to accept it or commit an unlawful 
act and make itself liable to a fine of $5,000. 

Now does the bill provide for an appeal to the Interstate Commerce Commis¬ 
sion? The bill does not use the term appeal. Nor in sketching the proceeding 
does it describe an appeal. The objection of a railroad is to be tiled not with 
the commission but with the Postmaster General, who “ shall certify the method 
and objection, and such other papers as in his judgment may be essential to 
an understanding of the method, to the Interstate Commerce Commission.” 
This seems to be only a reference, not an appeal. 

There is no provision here for an appeal nor a day in court for the railroad. 
Without further pursuit in detail the underlying principle may be characterized 
as one obnoxious to our fundamental conception of justice, in that it proposes 
to confer upon one contracting party full power in his discretion to impose upon 
the other contracting party terms which he is bound to accept, thus depriving 
him of his lawful contractual right. 

Question 3. What is a desirable plan for compensating railroad companies 
for transporting the mails? 

Answer. To ascertain on the average what the space required would be worth 
to the railroad if occupied by passengers or express matter. The department 
requires a certain space fitted up, supplied, and attended to in a prescribed 
manner for its exclusive use. By all rules of trade it should pay for the space 
appropriated, whether filled or not. 

Now, for a few words in general. This bill falls into the class of interstate 
legislation, yet it is in direct contravention of the spirit of and the principle 


RAILWAY MAIL PAY. 


67 


underlying that legislation. The underlying principle of the interstate com¬ 
merce law is absolute equality among shippers. But under this bill the United 
States would assume the position of a favored shipper, entitled to a lower rate 
not only, but a rate of its own making in the discretion of its representative. 

It goes without saying that the United States intends to do what is right. 
It is becoming, therefore, that a fair and adequate rate be found and established 
by statute. Should this be done there will be no kick on the part of the rail¬ 
roads. Allow me to hand you herewith a copy of a communication addressed 
to the Speaker of the House of Representatives by Mr. Frank Sullivan Smith, 
president of the Short Line Railroad Association, which goes into more detail 
than I have thought necessary to answer your questions. 

I also inclose copy of bill 4044, introduced by Mr. Talbott on April 11, 1911, 
into the House of Representatives, which is supposed to be satisfactory to the 
railroads. 

Respectfully, yours, Jno. Wilson Brown, President. 

You will kindly understand the above is also the answer of the Maryland 
Electric Railways Co. . j. w. B. 


lias justice fled from Washington, 
And left a naked skeleton, 

That we should take this bill to be 
Remotest kin to equity? 


Short Line Railroad Association, 

New York , February 29, 1912. 
The Speaker of ti-ie House of Representatives, 

Washington, D. C. 

Hear Sir : In view of the admission made by the Postmaster General in his 
annual report for the fiscal year ending June 30, 1911, that the statistics ob¬ 
tained during the course of the investigation he had caused to be made in regard 
to railway mail transportation, as contained in his report and the recommenda¬ 
tions submitted to you, designated as House Document No. 105, disclosed the 
fact that certain railroad lines “ were actually carrying the mails at a loss,” 
the Short Line Railroad Association, whose roads have not only been underpaid 
and in many instances have not been paid at all for the services they rendered 
the Government, was encouraged to believe that House Document No. 105 
would recommend changes in the law, along the lines of those advocated by 
the association, or a reasonable and fair substitute therefor. Being thus led to 
believe, the association, with considerable difficulty, secured a copy of House 
Document No. 105, and after examining the statistics gathered and compiled 
according to the computations and methods adopted by the Post Office Depart¬ 
ment, eagerly read the recommendations made by the Postmaster General to 
adequately compensate the railroads, many of which showed according to the 
computations made in the report a loss from the mail service, from $16,000, 
$9,000, $5,000, $2,000, $1,000, $500 down to $100 and less for a period of one 
month. 

The recommendations brefly are: 

First. That the present method of compensation to railways for mail car¬ 
riage, having no sound basis either in cost of operation or value of service, be 
abandoned. 

Second. That there be substituted for the present method a method for com¬ 
pensation, based upon the cost of the service with a profit of 6 per cent to the 
railways. 

Third. That such cost of operation be determined by annual reports to be 
required by the Postmaster General from the railways upon a method of 
determination to be determined by the Postmaster General and foreshadowed 
to some extent in character by the reports required from railways in the inves¬ 
tigation of the subject of this report. 

Fourth. That if the railways disagree with the conclusion of the Postmaster 
General, either as to form, significance, or conclusions, the matter shall be 
referred on appeal to the Interstate Commerce Commission. 

Fifth. That it shall be unlawful for any railroad company to refuse to carry 
the mails at the rate of compensation provided by law when (and) for the period 
required by the Postmaster General so to do, and for every such offense it shall 
be fined not exceeding $5,000. 



68 


RAILWAY MAIL PAY. 


In considering the practical workings and effect of these recommendations 
in their bearing upon the service and the pay proposed to be accorded railroads 
in general and short lines in particular the services of one of the most capable 
and efficient auditors connected with one of the association short line railroads 
were invoked to analyze the recommendations. This analysis, upon review by 
the association, is fully concurred in and is herewith presented: 

“As to nebulous basis for the present method of compensation: It may be 
granted at once that the present basis of compensation is not scientific, having 
no tangible relationship either as to the cost of operation or the value of 
service. This unhappy state of affairs is true of every method of rate making, 
either for freight or passenger transportation or any other service for which 
railways assess charge upon the public. It is also true probably of the tangible 
charges for every exercise of human activity. There is no scientific reason why 
a clothing merchant should exact a profit of 50 per cent for his merchandise 
as against a profit of 20 per cent by a grocer. 

“ Rates for passenger transportation and freight transportation charged by 
railways doubtless took their origin from the rates charged for like service 
prior to and up to the time when rail transportation was introduced. It is not 
probable that they had any consistent relationship with the cost of transporta¬ 
tion—although some relationship to the value of service as determined by 
economic factors. The rates that prevailed prior to the introduction of rail 
transportation had really less relationship to cost of transportation, but prob¬ 
ably were somewhat more affected by the value of service, than the original 
rail rates. It is true probably that the rates of transportation, both prior to 
and after the introduction of rail transportation, were affected to some degree 
by costs, because excessive profits would invite a degree of competition which 
could be introduced at moderate capital expenditures, at least prior to the 
introduction of rail transportation. 

“ Transportation of mails before the introduction of rail transportation was 
effected along stage and water routes and on horseback, sometimes incidental 
to the established passenger and freight routes and sometimes the existence of 
the mail route occasioned the establishment of the passenger and freight routes. 
The compensation for mail carriage when along established stage routes was 
in the character of additional pay to the existing business of transportation. 
In no cases, or at least in few cases, did either the carrier of the mails or the 
Government contribute to the means of carrying, in the way of roads or bridges, 
which costs were largely borne by the local governments. In this a radical 
departure was introduced when mail carriage was undertaken by the railways, 
the investors in railways then paying the entire cost of providing the channels 
for carriage. 

“ In the process of time many influences have intervened to disturb whatever 
relationship originally existed between the cost of service and the rates charged 
therefor. The competition of other methods of transportation has largely af¬ 
fected rates between definite terminals. These disturbances have affected in¬ 
terior rates. Community competition and the competition of great industrial 
establishments have further affected rates. 

“ Where a given instrumentality affords several characters of facilities we 
must adopt some basis for apportioning the cost of the instrumentality among 
the several objects accomplished. 

“As rates for passenger and freight transportation by railways were probably 
originally based upon the rates previously existing on other methods of trans¬ 
portation, it is probable that the rates of mail transportation by railways were 
originally based somewhat upon the compensation required to secure mail 
transportation by the facilities existing prior to the introduction of railways. 
It is improbable that the present minimum rate of $42.75 per mile of route was 
arbitrarily evolved from the inner consciousnesss of a postal authority or a 
negotiation between the postal authorities and the railways. It doubtless bore 
some relationship to previously existing rates and ultimately to the cost of 
transportation of mails or to compensation therefor by more primitive methods 
of transportation. A hundred-mile route under this basis would pay $4,275 per 
year. The average minimum weight on these routes could not possibly be 
carried by any other method than rail transportation overland at anything like 
this cost, without taking into account either the cost of highways or advantages 
in time. 

“As to the proposition to substitute a method of compensation based upon the. 
cost of handling the business with 6 per cent profit: 

“ Years ago the Interstate Commerce Commission formulated an effort to 
ascertain the relative cost of operations as between passenger and freight 


KAILWAY MAIL PAY. 


69 


traffic. After some years this effort was abandoned by the Interstate Com¬ 
merce Commission. Railroads individually for their own information have, 
however, persisted in efforts of this character for the obvious advantages to 
be gained by such knowledge. The matter has again and again been studied 
with reference to the subject of the determination of reasonable rates for pas¬ 
senger and freight transportation respectively. A very small portion of the 
operating expenses of railways is inherently applicable either to passenger or 
freight traffic. The great bulk of railway operating expenses are not inherently 
capable of apportionment, and if this be true, how much less capable of appor¬ 
tionment are the original investments, particularly as to rights of way, roadway, 
and structures. It therefore follows that in respect of the great bulk of rail¬ 
way operating expenses, including taxes, and of the burdens incident to original 
or capital investment, any effort to apportion these burdens as between passen¬ 
ger and freight traffic must be upon more or less arbitrary bases. As to these 
arbitrary bases there must be adopted by the individual roads some theory of 
apportionment and these bases must differ in a profound and logical study, not 
only with each individual road but with each operating division of every large 
system. 

“ It must be kept in mind that prior to any apportionment of expenses against 
mail transportation there must first be made an apportionment of costs as be¬ 
tween freight traffic and passenger traffic. 

“ It being apparent that any apportionment of operating expenses between 
passenger and freight traffic involves the assignment of a very large proportion 
of such operating expenses upon arbitrary bases, such bases must have ra¬ 
tional or logical relationship to the conditions of each road, and only a very 
close familiarity with the conditions can equip anyone to determine these bases. 
The determination of the relative expenses of freight and passenger transpor¬ 
tation can only be made by each separate road. Where this apportionment is 
made for a special purpose the results will largely depend upon the parties 
making the apportionment. Therefore, a rate of compensation determined 
upon the additiion of a fixed per cent of profit to the cost of the service will 
result in rates of compensation varying largely according to the officer making 
the apportionment. It may be argued that the postal department will have the 
right of review as to this apportionment. When it is considered how many 
railroads will be charged with the making of this apportionment and how many 
reports will require review by the Post Office Department, and how relatively 
incompetent the forces of the post office will be to make this review by their 
necessarily imperfect knowledge of conditions prevailing on individual roads, 
the seriousness of the task is apparent. 

“The Postmaster General suggests that the compensation for mail trans¬ 
portation shall be based upon the ascertained cost plus a profit of 6 per cent. A 
careful study of the document he submits of the results of the departmental 
investigation indicates that in ascertaining the cost he has recognized but 
two factors, namely, those elements of cost usually designated as operating ex¬ 
penses and taxes. I can not find that he has taken into account any element 
of capital investment or the necessary burdens incident thereto. These bur¬ 
dens must be borne by traffic, and if it is proper to apportion operating ex¬ 
penses against mail transportation it would necessarily follow that capital 
burden must also be apportioned against mail transportation. 

“ The basis of the Postmaster General's conjecture that a profit of 6 per cent 
upon the mere cost of mail transportation would be compensatory to the rail¬ 
roads is not indicated in his reports. 

“As a matter of fact, a railroad whose gross earnings bear any less per cent 
to its operating expenses than 100 to TO per cent is in a bad way; that is to 
say, a railroad company on its entire traffic must realize a gross earning of 
substantially 43 i>er cent over its operating expenses to afford a fair return 
to its investors. 

“ in the apportionment of passenger operating expenses as between passen¬ 
ger traffic, express traffic, and mail traffic, the Postmaster General in his re¬ 
port has used the car-foot mileage assigned to each traffic as a basis of appor¬ 
tionment. As applied to the closed-pouch service, the linear space apportioned 
to mail traffic was on the basis stipulated by the department; that is to say, 
the railroads were directed to allow 6 linear inches full width of car for the 
first 200 pounds or less of average daily weight of mail carried and 3 linear 
inches for each additional 100 pounds. 

“ The department, however, states in the report that they followed the follow¬ 
ing rule; For weights of 100 pounds or less. G linear inches; for weights above 


70 


RAILWAY MAIL PAY. 


100 pounds and not exceeding 200 pounds, 10 linear inches; for each additional 
100 pounds, 5 linear inches. 

“ The result of this basis is that if a combined passenger, baggage, and ex¬ 
press car were used to carry mail in closed pouches, the car being 50 feet in 
length and the mail weighing an average of 200 pounds less than two one- 
hundredths of the cost of operating the car would be charged to mail service; 
that is to say, no matter how much unused space there might be in the balance 
of the car, but two one-hundredths of the car expense could be charged to mail, 
leaving ninety-eight one-hundredths of the car to be apportioned against pas¬ 
senger and express service. It can readily be seen that this method of appor¬ 
tioning the cost of the mail service applied to short-line railroads carrying 
only pouch mail would place them in the class to receive as he proposes $25 
per mile per year, if the ascertained cost and 6 per cent does not equal that 
amount. 

“In addition to the large burdens put upon the railroads by existing govern¬ 
mental commissions in exactions of reports of operation, the Postmaster Gen¬ 
eral proposes that all railroads shall hereafter be required to make a report to 
the Postmaster General annually of the operations of the railroad, with such 
an apportionment of the operation expenses as shall enable a determination 
of the operation expenses applicable to a very small percentage of its traffic. 
Because of the inherent difficulties of this apportionment it may be assumed 
that the reports required would be of a very complex character and both diffi¬ 
cult and expensive to prepare. 

“The Postmaster General proposes that a different period of the year shall 
be selected for this report than the period at which the annual reports to other 
governmental agencies are made, thus inflicting upon the railroads the impossi¬ 
bility of using the data already prepared, for the purpose of making these 
reports so far as it might be possible. 

“ He also proposes to impose upon the railroads certain methods of appor¬ 
tionment, which, in the words of the committee on railway-mail pay of the 
American Railway Association, are never accepted by anyone with practical 
experience in railway accounting or operation and condemned by the courts in 
at least two important cases.’ The imposition of such methods will prevent the 
railroads from using the data which for their own practical purposes they 
have compiled for the purpose of ascertaining the relative costs of conducting 
passenger and freight operations, which, if applicable to one road would be 
entirely inapplicable to another and of no practical value, to the railways. 

“ The Postmaster General then proposes that if the railways disagree with 
the conclusion of the Postmaster General upon the reports rendered, the mat¬ 
ter shall be referred on appeal to the Interstate Commerce Commission. 

“ It may be mentioned at the outset that the Interstate Commerce Commis¬ 
sion long ago despaired of applying a rational basis of apportionment of oper¬ 
ating expenses as between passenger and freight traffic. 

“ If the Interstate Commerce Commission did not recognize the methods des¬ 
ignated by the Postmaster General, endless confusion would result from such 
appeal. Moreover, it may be assumed that in proportion to the burden im¬ 
posed upon the Interstate Commerce Commission by such appeals the present 
burden upon that commission would become insignificant, particularly as differ¬ 
ing conditions would render any basis inapplicable to any considerable number 
of roads, and the determination of the appeal would involve the study of each 
road’s conditions, varying to some extent from year to year. 

“The situation is presented of a controversy in which judge and plaintiff 
are one, to be appealed to an instrumentality substantially identical in interest 
to the plaintiff and lower court; that is to say, the railways have to accept 
and transport the mail traffic. The compensation to be paid is to be based 
upon an arbitrary percentage of the cost of the traffic, much inferior to the 
compensation ordinarily obtained for its general traffic in proportion to its 
cost; the method of determining its cost shall be stipulated by Government and 
appeal must be made to the Government.” 

According to the statement made by the Postmaster General in House Docu¬ 
ment No. 105, data was received from 2,778 out of 3.309 authorized mail routes. 
The monthly loss from the mail service on these routes as given in Table 7 is 
$75,733.07, a total for 12 months of $908,796.84. The loss given is based upon a 
computation where the interest on the capital is omitted and a large percentage 
of dead space in mail cars, which can not be used as passenger space, is trans¬ 
ferred to the passenger service. 


RAILWAY MAIL PAY. 


71 


If the department concedes a loss of nearly a million dollars a year, based 
upon false and misleading methods of computation adopted by it in arriving 
a its conclusions, the actual loss incurred must therefore remain problematical. 

However, enough has been shown to bear out the statement of the Postmaster 
General that if an adjustment of railway-mail pay is lodged in his hands that 
he will still further reduce the amount to be paid the railroads $9,000,000 a 
year. 11ns amount seems conservative when we consider his method of arriv¬ 
ing at the cost of the service and the percentage of profit he is willing to grant 
based upon his figures giving the cost. 

At the piesent time short-line railroads, making free side and terminal mail 
deliveries and furnishing apartment-car space for nothing, are contributing 
to the post-office fund more than $5,000,000 a year. S 

Yours, respectfully. 

Short Line Railroad Association, 

By Frank Sullivan Smith, President. 


TALBOTT BILL. 

f. 

[H. R. 4044.] 

Ill the House of Representatives. April 11, 1911. Mi-. Talbott of Maryland 
introduced the following bill; which was referred to the Committee on the 
Post Office and Post Roads and ordered to be printed. 


A RILL To amend existing laws and equalize pay for mail service on railroad lines. 


Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled, That that part of the act of March 
third, eighteen hundred and seventy-three, as it appears in section four thousand 
and two of the Revised Statutes and as it has been modified by subsequent 
legislation, be, and the same is hereby, amended to read as follows, namely: 

“ The Postmaster General is authorized and directed to readjust the com¬ 
pensation to be paid from and after July first, nineteen hundred and eleven, 
lor the transportation of mails on railroad routes upon the conditions and at 
the rates hereinafter mentioned: 

“First. That the mails shall be conveyed with due frequency and speed; 
and that sufficient and suitable room, fixtures, and furniture in a car or apart¬ 
ment properly lighted and warmed shall be provided for railway postal clerks to 
accompany and distribute the mails. 

“ Second. That the pay per mile per annum shall be at the following rates, 
namely: On routes carrying their whole length an average weight of mail per 
day of not more than five hundred pounds, seventy-five dollars; one thousand 
pounds, eighty-five dollars and fifty cents; one thousand five hundred pounds, 
one hundred and six dollars and eighty-seven cents; two thousand pounds, one 
hundred and twenty-eight dollars and twenty-five cents; three thousand five 
hundred pounds, one hundred and forty-nine dollars and sixty-two cents; five 
thousand pounds, one hundred and seventy-one dollars; and on routes carrying 
their whole length an average weight of mails per day of upward of five 
thousand pounds by making the following changes in the rates per mile per 
annum for the transportation of mail on such routes in effect on June thirtieth, 
nineteen hundred and seven, and hereafter the rates on such routes shall be 
as follows: On routes carrying their whole length an average weight of mail 
per day of more than five thousand pounds and less than forty-eight thousand 
pounds, the rate shall be five per centum less than the rates on June thirtieth, 
nineteen hundred and seven, on all weight carried in excess of five thousand 
pounds; and on routes carrying their whole length an average weight of mail 
per day of more than forty-eight thousand pounds the rate shall be five per 
centum less than the rates on June thirtieth, nineteen hundred and seven; on 
all weight carried in excess of five thousand pounds up to forty-eight thousand 
pounds, and for each additional two thousand pounds in excess of forty-eight 
thousand pounds, the rate shall be nineteen dollars and twenty-four cents 
upon all roads other than land-grant roads, and upon all land-grant roads 
the rate shall be fifteen dollars and thirty-nine cents for each two thousand 
pounds carried in excess of said forty-eight thousand pounds; the average 
daily weight to be ascertained in every case by the actual weighing of the mails 



72 


RAILWAY MAIL PAY. 


on all of the railroad mail routes at the same time for thirty-five successive 
days, commencing on such date, to he designated by the Postmaster General, 
as is fair and just to the Government and to the carriers, and not less frequently 
than once in each year, and the result to be stated and verified in such form 
and manner as the Postmaster General may direct, and that the Postmaster 
General is hereby authorized and directed to require a railroad mail carrier 
to provide for tlie carriage of the mails between its trains and a post office 
or postal station only where such post office or postal station is located in a 
railroad depot or station of such carrier.” 

Sec. 2. That section four thousand and four of the Revised Statutes, as modi¬ 
fied by the act of March second, nineteen hundred and seven, making appro¬ 
priations for the service of the Post Office Department for the fiscal year end¬ 
ing June thirtieth, nineteen hundred and ten, and for other purposes, be, and 
is hereby, amended by adding thereto the following, namely: 

“And the Postmaster General is hereby authorized and directed to allow 
for space used for railway post-office purposes in apartment cars at pro rata 
of the rate of compensation allowed for postal cars forty feet in length.” 


Missouri & Louisiana Railroad Co., 

Kansas < iti /. Mo.. September 20. 1912. 

Mr. Jonathan Bourne, Jr. 

Dear Sir: Your letter of the 17th. to which is attached a copy of Senate 
bill 7371. to provide the manner of determining the compensation of railroads 
for the transportation of the mails. We are not entirely familiar with the gen¬ 
eral proposition as it would naturally affect the more important trunk lines of 
the country, but as to smaller lines like ours, operating but 10 miles of main 
line over which the mail is transported, we have to suggest that the compensa¬ 
tion is not reasonable. We provide on our line, in this State two trains each 
way per day, except that we do not operate on Sundays. We are allowed an 
annual compensation of $449.28. This for transporting the mail and in addition 
caring for the handling of pouches to and from post offices at Bevier, Keota, and 
Ardmore, Mo. At the least calculation it costs us $5 per month at each of these 
towns to have the mail carried to and from the post offices, or a total of $180 
per year to be deducted from the allowance made us by the Government, leaving 
us but $269.28 for the service of transportation. It does appeal to us that with 
the smaller lines a greater allowance per mile should be made. The same rate 
of pay per mile as applied to the larger lines yields, perhaps, a fair revenue for 
the service furnished, but for the smaller lines it does not. all of which we sub¬ 
mit for your kind consideration. 

Yours, truly. .Tno. A. Sargent. 


Missouri. Oklahom a A' Gulf Railway Co.. 

Muskogee, Okla., November 1. 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Replying to yours of September 11. I submit the following memo¬ 
randa for your consideration: 

(1) The present plan of compensation for railway mail pay is inequitable to 
the short-line railroads, for the reason that large railroads are paid a rental 
charge for all cars 40 feet in length, while small roads are paid no rental what¬ 
soever. Many of the short-line railroads are paid on the basis of the minimum 
of $42.75 per mile, and have not had a weighing of the mail on their line for 
several years, while on the large lines the mail is weighed annually and the pay 
adjusted accordingly. The present plan is also unscientific, because it has no 
tangible basis and has no relation to the cost of the service. 

(2) I do not consider the present plan as outlined in bill 8. 7371 a proper 
basis for arriving at the compensation for several reasons. First, the railroads 
are allowed only 6 per cent over the cost of transporting the mails, which cost 
includes operating expenses and taxes. Now railroads are heavily bonded and 
pay a large interest charge on their bonded indebtedness, and are forced to 
earn at least 30 per cent of their gross revenues in order to pay this interest: 
that is, their expenses should not exceed 70 per cent of their gross earnings. 
Then there are other charges and expenses to be met that are not included in 




RAILWAY MAIL PAY. 


73 


their operating expenses, such as rents, discounts, and additions and better¬ 
ments to their existing property, which are necessary to meet competition, or 
tor the proper conduct of their business. As before stated, in order to pay their 
interest and their other charges, and to give their investors a fair return, it is 
necessary that they earn at least 30 per cent of their gross revenues, and if 
freight tratlic, passenger traffic, etc., is expected to carry this burden, why should 
not the mail traffic also earn 30 per cent of its gross revenue instead of 6 per 
cent7 Second, this bill seems to be based on the recommendations of the Post¬ 
master General contained in House Document No. 105. The Postmaster General 
in arriving at his cost of carrying the mail distributes the car space as follows: 
For weights of 100 pounds or less, 6 linear inches; weights above 100 pounds 
and not more than 200 pounds, 10 linear inches; and for each additional 100 
pounds, 5 linear inches. 

On this basis, on this line, which carries about 800 pounds of mail per mile 
per day. there would be about 40 linear inches of the car assigned to the mail 
traffic or one-fifteentli of the space, while as a matter of fact there are 15 feet 
of each 50-foot car devoted to the mail, or about one-third of the space, and 
it can readily be seen that under the Postmaster General’s plan, the mail would 
not receive its proper proportion of the expense. Third, under this bill it will 
be necessary for each railway to make reports to the Postmaster General in 
order that lie may determine the cost of carrying the mail. Now, in order to 
arrive at such cost, it is first necessary that the expenses of a railroad be 
divided into freight expenses and passenger expenses. Only a small percentage 
of a railway’s expenses is directly assignable to either freight or passenger 
traffic; the large majority is chargeable to both freight and passenger traffic 
and can not definitely be segregated; however, most railways endeavor to make 
such a separation of their expenses, and in order to do so they employ various 
arbitrary bases for the segregation; these bases being determined by the actual 
physical conditions on the railway itself. It does not appear, therefore, that 
the Postmaster General or his corps of assistants are competent to pass on the 
reports of the various railways throughout the country, they being ignorant 
of the local conditions and the methods employed in separating the expenses 
and the reasons therefor. House Document No. 105 provides that the railways’ 
reports to the Postmaster General shall be made at different times and for 
different periods from those now made to the various Government commis¬ 
sions. This appears unreasonable, and will put an unnecessary hardship on 
the railways by depriving them of the use of the statistics and figures already 
prepared. 

(3) As the various railways are themselves in the best position to determine 
the cost to them of handling the mail, it would seem that they should also be 
in the most advantageous position to name the compensation. Therefore, it 
seems to me that they should be allowed to file tariffs with the Interstate Com¬ 
merce Commission governing the rates for transportation of the mails the same 
as for the transi>ortation of freight and passengers. Of course these rates 
would be subject to attack by the Postmaster General just the same as the rates 
for freight and passenger traffic are open to the criticism of the public. 

Yours, truly. 

Wm. Kenefick, President. 


Missouri Pacific Railway Co., 

St. Louis, Iron Mountain, & Southern Railway Co., 

ftt. Louis. Mo., November 22, 1912. 

Hon. Jonathan Bourne, Jr.. 

Washington. D. C. 

Dear Sir: I have to acknowledge receipt of your letter of September 11. 
1012, inclosing a copy of Senate bill 7371. and requesting views upon three 
specific inquiries on the subject of railway mail pay, which, with answeis 
thereto, are contained in a memorandum attached. 

The real issue is whether the railroads are overpaid or underpaid foi mail 
transportation. The railroads have been protesting since 1907, particularly, 
that they were underpaid, and that reductions of about $8,000,000 l>er annum, 
made in' that year, were unjust to them, and that some form of adjustment 

should be made. ___ ^ ~ 

The Senate Post Office Committee Report No. 955, Sixty-second Congress, 
second session, July 23. 1912. page 25, which accompanied the Post Office ap- 



74 


RAILWAY MAIL PAY. 


propriation bill, stated that “the committee is of the opinion * * * that 

the rates are excessively high.” 

This view, presumptively, is founded upon the report of the Postmaster Gen¬ 
eral, Document No. 305, wherein he purports to show that the railroads are 
overpaid $9,000,000 per annum, which might be saved by enactment of a bill 
proposed by him, and introduced by your committee, as S. 7371. 

There is no proof in his report that the railroads are overpaid; on the con¬ 
trary, even superficial analysis explodes any such theory, because the methods 
employed in making his deductions are fatally in error and fortunately easily 
demonstrated. 

His first serious error is in overlooking the right of railroad property or 
capital to earnings, which is a recognized primary and constitutional factor in 
all rate cases. 

This property is. of course, of enormous value, as follows (1910, I. C. C. 
Report) : 


Represented by funded debt_$10, 303. 474, 858 

Stock_ 8,113,657.380 

Total_ 18,417,132.238 


This represents the plant, which, of course, must exist to enable the rail¬ 
roads to perform mail and other transportation services. It is almost too 
apparent to allude to the effect of such a policy. If applied generally to rail¬ 
road or any business, it would, of course, bankrupt and destroy them. 

His second serious error consists in arbitrarily and erroneously cutting out 
millions of car-foot miles used directly or incidentally in performing mail serv¬ 
ice, as reported to him by the railroads in the reports he used and changed to 
the extent of approximately 28 per cent. As the proportion of car-foot miles 
is the essential and material factor in his calculations, his erroneous action 
in not only cutting out such mail car-foot miles but changing the same instead 
to passenger car-foot miles, is fatal to any theory that the railroads are over¬ 
paid. 

His third serious error is in dismissing without any consideration, either as 
to costs or compensation, the extensive and valuable service rendered by the 
railroads in performing what is commonly known as “ messenger service,” and 
which is the carrying of mails between the railroad stations and the post 
offices, where the latter are within one-quarter mile of the station. This is 
not a natural function of the railroad company, because it does not handle pas¬ 
sengers, baggage, freight, or express beyond its station property, but is an 
extra service which the railroads perform and saves the Post Office Department 
from employing 30.000 to 40,000 contract messengers, and which saving former 
Postmaster General Meyer reported to the Senate committee, amounted to 
$4,393,000 per annum. A service of so great value is ignored in treating rail¬ 
way mail pay generally and in the calculations made in Document No. 105. 

It is obvious that the railroads are not overpaid, as that document indicates, 
and no foundation exists for such opinions which may be based thereon. On 
the contrary, the reports which the Post Office Department required of the rail¬ 
roads demonstrated that they were very greatly underpaid for mail service. 
Perhaps best illustrated by figures which the Postmaster General does not ap¬ 
pear to have submitted in his report, namely, that mail space earned only $3.23 
per thousand car-foot miles, whereas the passenger space earned $4.42 per 
thousand car-foot miles. This indicates underpayment to the railroads of over 
$16,000,000 per annum, according to figures compiled by the committee on rail¬ 
way mail pay. 

Unfortunately and prejudicially to their interests and justice, there has al¬ 
ways seemed to exist a feeling that the railroads were paid excessively for 
carrying the mail. Such views have not been founded upon any competent in¬ 
quiry. but upon mere assertion. It has been no uncommon thing to notice 
newspaper items asserting it, and having the effect of creating public sentiment 
in that direction when there has been nothing substantial in the way of official 
evidence to support such assertions. 

The annual amount of railway mail pay has only seemed large and attracted 
attention because it represented the largest single item in the Post Office appro¬ 
priation bill, and without full consideration of the immensity of the service ren¬ 
dered by the railroads receiving it, not only in the transportation throughout 
the year on all the railroads, and practically on all of the train service of the 






RAILWAY MAIL PAY. 


75 


hntion^^tiL 1 ^ Q ni !? Uli S P 0 .? offices in addition on this mileage for the distri- 
fncMental services WaS m transit and for the Performance of other 

The Government collected in 1910, $224,128,637.12 in postage, yet for the 

it b nI?d S ovm C 8170 nmr° ad ,l 0 n i y paid ^.405,311.27, while on the other hand 
^ p ; d S $1<0,000,000 for the function of collection and delivery of that mail 

ppiL!? G nhn,Too tratl f 011 0f , tb S poStal service - In othei ‘ words, the railroads re- 
1 1 cents out ot the dollar the Government collected in postage 

transportation of the entire mail, whereas the Government used about 
.8 cents for collection, delivery, and administration. 

In the past 10 years the amount paid the railroads in proportion to postal 
revenue has been very steadily decreasing from 34 to 22 cents per dollar, while 
the collection, delivery, and administration cost during the same time has in- 
cieased from 66 to 78 cents per dollar. There is nothing in these facts to sup¬ 
port any theory of overpay to railroads. In reality railway mail pay instead of 
representing a large proportion of railroad revenue is, indeed, very small. In 
1910 it only amounted to 1.78 per cent of gross revenue, while the roads had 
to depend upon freight, passenger, and express business for 98.22 per cent of 
revenue. The railway mail pay does not even equal one-half of the taxes alone 
which the railroads pay. 

The only thorough inquiry, previously made on the subject of railway mail 
pay, was by the commission of 1898, which, after two years’ study and volu¬ 
minous testimony, reported as follows: 


“ u P° n a careful consideration of all the evidence and the statements and 
arguments submitted and in view of all the services rendered by the railways, 
we are of the opinion that 4 the prices now paid to the railroad companies for 
the transportation of the mails’ are not excessive, and recommend that no 
reduction thereof be made at this time.” (S. Doc. No. 89, pp. 19 22 25 29 
52d Cong., 2d sess.) 


It demonstrated then that there was no foundation for the sentiment of 
overpay that existed, based upon mere assertion, and which culminated in the 
appointment of the commission. Notwithstanding, a further agitation of the 
subject arose in 1907, with disastrous and, as we believe, decidedly unjust results 
to the railroads. 

Congress had the subject before it, and by act approved March 2. 1907. re¬ 
duced the railway mail pay $2,723,000 per annum, cutting the pay on weights 
and full postal cars. No sooner, however, was this done—in fact on the day 
the act was signed by the Executive—the Postmaster General issued order No. 
165, commonly known as the “divisor order,” which cut the railway mail pay 
$4,941,000 per annum more than Congress, by its own action at that time, re¬ 
garded as justifiable. 

The railroads have been protesting this double method of reduction from two 
sources was decidedly unjust and far beyond the wishes and action of Congress 
at that time. 

Instead of a reduction of $2,723,000 per annum designed by Congress, an 
actual reduction of $7,664,000 has been made. Included in the reductions made 
by Congress was a cut in the pay of full postal cars, which, at that time, were 
of wooden construction. Since then not only has Congress required the recon¬ 
struction of the wooden cars to standards, but at the last session provided for 
their retirement and replacement by all-steel equipment and without any pro¬ 
vision whatever for compensation to the railroads. Certainly the higher class 
of equipment required and the expense of substituting it for wooden cars, 
which must be abandoned, form a sufficient businesslike basis for a restoration 
of the rates that were in effect prior to the cut of 1907. 

It is hoped the commission, of which you are chairman, will recommend a 
restitution to the railroads of these reductions in the form of an annual weigh¬ 
ing, pay for mail-apartment car space, and compensation for messenger service. 

The fairness of such action is especially emphasized at this time by the in¬ 
auguration of the parcel post on January 1, next, which, apparently, will in¬ 
crease the volume of mail and for which no provision in the way of compen¬ 
sation has been made to railways, although such provision has been made to 
increase the pay of rural carriers, star-route carriers, and messenger service. 

The principal service in connection with parcel post will be that performed by 
railroad companies in its transportation over the immense mileage of the 
country, and the justice of an equitable method of pay will, no doubt, appeal 
readily to every Member of Congress, as it can not be expected that it will be 


76 


RAILWAY MAIL PAY. 


transported by the railroads for nothing while the Government is collecting a 
revenue thereon, and considering that the railroads, at the present time, are 
being compensated for its transportation as express. 

The Post Office Department, as a result of the complaints of the unjust re¬ 
ductions in 1907, called upon the railroads for information and statistics on 
forms which it had sent out. The railroads, with the object of assisting in 
collection of the data correctly and promptly, designated a committee on rail¬ 
way mail pay to assist and to study the results. 

The committee, on behalf of the roads, has answered the three inquiries con¬ 
tained in your letter, in which views I fully concur. 

For convenience there is attached a copy of the questions and answers thereto, 
submitted by the committee. 

Yours, very truly, K. J. Pearson, 

First Vice President. 


Nevada Copper Beet It ailroad Co.. 

Salt Lake City. Utah. November II. 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir : The writer does not believe the present plan of compensation for 
carrying mails is equitable in the following respects: 

If he is not mistaken, all roads are paid alike for the service without regard 
to conditions. In some cases the cost of handling the mail is greatly in excess 
of what it is in others and should be paid for accordingly. A road having a 
long haul can certainly carry the mail at a less price per mile than one having a 
short haul. If a flat rate is allowed in all cases it should be sufficient so as 
not to work a hardship upon the small, weak roads. The writer understands that 
the present compensation is not sufficient in a great many instances to pay the 
expense incurred in handling mail. 

I would also suggest that the railroad company ought not to have to deliver 
the mail beyond its stations, but that it should be carried by the postmaster 
from the station to the post office. The writer also understands that where the 
mail is carried in apartment cars where part of the space is used for express 
and baggage, that the mail matter does not pay for its proportion of the 
dead space in the car, but throws an undue burden upon the express, baggage, 
and passenger service. 

Would it not be better to allow each of the mail-carrying roads to fix its own 
tariff the same as it does in carrying other freight or express, and let it be 
subject to revision by the Interstate Commerce Commission? 

It seems to us, however, that the present law, supplemented by H. It. 4044, 
would be a just and equitable basis for compensation. We understand that 
there have been several hearings in Washington on this bill, and that those 
Members of the House who were present were convinced of the justice and 
equity of its provisions. 

I do not believe that it is right to make the Postmaster General a judge of 
what the compensation should be, in view of the fact that it is to his interest 
to make as good a showing as possible in his department, so that assuming that 
he is ever so honest and capable, he is not in as good a position to judge fairly 
as an entirely disinterested person or board. 

We understand that Senate bill 7371 was based upon the Postmaster Gen¬ 
eral's report in House Document No. 105, and that according to his recom¬ 
mendations the pay of the railroad for carrying mail is to be cost plus 6 per cent, 
and that in arriving at the cost he only takes into consideration operating ex¬ 
penses and taxes. This certainly is not just, but would amount almost to 
confiscation. If it is going to be fixed on a percentage basis, the cost of the 
mail should certainly bear its proportion of all of the expenses. If we take 
only part of them into account we may leave out enough to entirely wipe out 
the profit and more. The mail service should be made to carry its proportion 
of overhead charges, interest on capital, upkeep of the road, and all other ex¬ 
penses that are necessary in operating a reasonably well-operated road. Any¬ 
thing less than this imposes a burden upon a small road, which it can not 
afford to carry, and the Government has no right to impose any such burden. 

Yours, very truly. 


W. C. Orem, 

President Nevada Copper Belt Railroad Co. 



KAILWAY MAIL PAY. 


77 


Nevada County Narrow Gauge Railroad Co., 

Grass Valley, Cal., November 7, 1912. 

Hon. Jonathan Bourne, 

Washington, L). C. 

Dear Sir: Yours of September 11 at band and contents carefully noted, and 
in answer, considering tbe effect on this road, beg leaVe to answer as follows to 
question No. 1: 

The present plan of compensation is not an equitable one to the railroads 
unless the extra weight of the mail carried during the biennial election contest 
for Representatives, and the four-year contest for President, and the franking 
privilege then used be taken into consideration and the roads compensated 
therefor. Weight, value, and time being the chief factors in making all rates, 
why not continue the present plan until a better one is found? The Post Office 
Department is not now paying us an exorbitant figure for the mail service, the 
ascertained weight being carried by us 52,200 pounds per annum, carried on 
seven trains, for which we receive an annual compensation of $2,021, from 
which we are required to pay $180 for the transfer of the mail to and from the 
terminus at Nevada City and the post office, and about a like amount in the 
time of our employees at Colfax for a like service there, so that the mail nets 
us about $1,700 per annum, or a little over 30 cents per 100 pounds. 

The express company pays us an average of 34 cents per 100 pounds on their 
business, and that company provides a messenger on the trains and one at each 
end to give and receive packages and check the same, while our employees are 
required to do that service for the mail. Can’t the post office pay as much? 

Our average first-class freight rate is 20 cents per 100 pounds. Our passen¬ 
ger rate is 74 cents per mile, and he takes himself on and off the train and pays 
us at the rate of about $1 per 100 pounds for carrying him the same distance 
we carry the mail for 30 cents, and as the tables submitted by the report of 
the Second Assistant Postmaster General are based on passenger service, we 
fail to see any justice in the proposed reduced rates. 

Question 2. The principle of the plan may be all right, but the terms proposed 
are most certainly unjust for the following reasons: 

It proposes to place the compensation for carrying the mail at $25 or less 
per mile of road per annum. 

The Postmaster General may order new or additional service during a term 
without increase of compensation, but may decrease compensation for any re¬ 
duction in service. Are not these beautiful and just provisions for the Govern¬ 
ment, but where does the carrier get off? 

This will cut our revenue to $550 or less per annum from our present return 
of $1,700, and this in the face of the fact that with the first of the year a 
parcel-post service will be inaugurated, which will no doubt cut heavily into 
the express business and thus diminish our revenue from that source. It will 
add the loss of the express business to the postal business, and the carrier will 
be required to transport it as mail matter, thus our return of between $4,000 
and $5,000 per annum from the express will be cut possibly one-half, and as 
I understand from the bill we would have to accept not more than $550 for 
all this, and whatever new business the cheap postal service will create under 
a penalty of $5,000 for refusal. 

Another provision of the bill requires the railroads to carry all accredited 
agents and officers of the Post Office Department, when in the exercise of their 
duties, free of charge. 

Why should we be required to do this? We have to place a post-office stamp 
on every piece of mail matter we send out, whether on Government require¬ 
ments or on our private business. The Government did not build or help build 
this road, the stock and bondholders built it entirely, and all contracts we have 
with other corporations requiring free transportation, it becomes reciprocal, and 
we are compensated thereby. Why not the Government do likewise or cut this 
provision out entirely? 

Our road cost about $700,000 to build. Our returns, as shown by our reports 
made to the Interstate Commerce Commission, to which you are respectfully 
referred, showed our road made a net revenue last year of $24,544, being 31 per 
cent on the investment. For 23 years this road paid no dividends. By strict 
economy it is now paying a 4 per cent dividend to its stockholders from its 
earnings. 

I trust you will give the foregoing careful consideration and view the situa¬ 
tion from the carrier's point of view as well as the Government’s. 


78 


RAILWAY MAIL PAY. 


If a change of plan is necessary or desirable, I suggest you consider H. R. 
4044, prepared by the Short Line Railroad Association, as furnishing a plan 
more equable to all concerned, but to the provisions of the Senate bill 7371, rec¬ 
ommended by you, we earnestly protest, as the returns from it would be totally 
inadequate, and the penalty very harsh and entirely uncalled for. 

Respectfully, 

Superintendent and Treasurer. 


New Park & Fawn Grove Railroad, 

New Parle , Pa., September 7,9, 1912. 

Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir : Replying to your letter of the 11th instant, regarding plan of com¬ 
pensation for service of carrying the mails, beg to say in answer to questions 
1 and 2 that I am not in position, with the limited knowledge I have, to answer 
these; would say that, as far as our line is concerned, we are satisfied with 
the present compensation, but would not be satisfied with any less. 

Regarding question 3 I have no plan that I could offer you. 

Hoping this will be satisfactory, I am, 

Yours, respectfully, John H. Anderson, President. 


New River, IIolston & Western Railroad Co., 

Narrows, Giles County, Va., October 26, 1912. 

Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir : We note your recent communication regarding Senate bill 7371, 
and thank you very much for calling our attention to same. 

We are only a 20-mile road and naturally think the present compensation for 
carrying the mails small enough. 

Yours, very truly, F. E. Bastian, Manager. 


New York, New Haven & Hartford Railroad Co., 

New Haven, Conn., September 20, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir : Your letters to President Mellen, asking for comments upon 
S. 7371. have been duly received. 

I note that the bill is substantially that recommended by the Postmaster 
General in House Document No. 105. I hope to have an opportunity of making 
specific criticisms of it before your committee at some of the hearings to be 
held, I assume, between now and the opening of Congress. For the present I 
shall offer the following general criticisms: 

The business of carrying mail for the United States Government should be 
established upon a similar basis to that of carrying commodities for other 
shippers. Neither the rate nor the cost of performing the service should be 
determined in the first instance by the Postmaster General. The Interstate 
Commerce Commission should be charged with that duty, upon representations 
made by the Post Office Department on the one hand and by the railroad com¬ 
pany on the other, with full authority on the part of the Interstate Commerce 
Commission to verify, by investigation or otherwise, all statements and reports 
made by each party. 

The Interstate Commerce Commission and not the Postmaster General should 
be authorized and directed to readjust the pay after the investigation afore¬ 
said. When that has been fixed and the service prescribed, the Postmaster 
General and the railroads should each be held strictly to the performance of 
the contract. Additional service required by the Post Office Department should 
be anticipated by the commission and the rate fixed for it. Failure to perform 
the service prescribed in the contract should meet with a penalty anticipated 
and prescribed by the Interstate Commerce Commission. It is not fair nor 
reasonable to permit the Postmaster General to order new or additional service 
during the term the adjustment shall have been made without giving additional 
compensation therefor during such term; nor, on the other hand, is it fair that 






RAILWAY MAIL PAY. 


79 


sarv^hnifir? 1 C01Jtl p- ct ’ abandoned because the same has become unneces- 

thll' n ? 11 • tlt ! e the V ailroads so abandoning the service to as much pay as 
tiiej bad previously received. v 

.. J* .Jf to embrace in the contract transportation of those engaged in the 

" 01 v ° . 801 ting the mails and to provide compensation for their carriage 
co l lslderatl ?n. f or the contract. The Post Office Department ought not 
, ''7 iee tiansportation, which it is the policy of the Government to forbid 

o ot er shippers. Much more should this apply to post-office inspectors and 
then- accredited agents, who are traveling on the regular trains of the railroad. 

e\ s ould be leqnired to pay their fare the same as any other passenger and 
chaige the same as part of their expense account to the department. 

I have no criticism to make of the specifications for R. P. O. and apartment 
cars used for Railway Mail Service. Undoubtedly they should be of such con¬ 
stitution as should fit them for the service and should be first class and sani¬ 
tary in every respect; but the cost of constructing and maintaining them should 
be reckoned in as a part of the compensation to be paid to the railroad companies 
and any change in existing specifications should be reflected in the adjustment 
of compensation. I think also that there should be taken into consideration the 
class of trains upon which the mail is carried. Upon certain of our trains 
which make very fast time and which are limited in equipment an additional 
R. P. O. car would require a slowing of the schedule. On other trains a schedule 
can easily be made with one or even more additional R. P. O. cars. It is a 
question, in frequent service such as we give, running, for instance, substan¬ 
tially 14 trains each way per day between Boston and New York, whether 
it is essential that mail should be sent on our limited trains and so arrive in 
Boston or New York half an hour or, at most, an hour before a slower train. 
If the department insists upon sending mail upon these fast trains, they should 
be prepared to pay for it and for the motive-power equipment necessary to 
make the time. In other words, my criticism generally of the bill is that it pur¬ 
ports to make a contract between the Post Office Department and the railroads 
and then leaves it in the power of the Postmaster General to modify the terms 
of that contract in his discretion without providing any additional compensation 
or in fact giving the railroads reasonable notice of the proposed changes. 

As I have said, I will criticize this bill more in detail before your committee 
if you will give me an opportunity to appear before you between now and the 
1st of December. 

Very truly, yours, E. G. Buckland, Vice President. 


Norfolk & Western Railway Go., 

Roanoke, Va., October 11, 1012. 

Hon. Jonathan Bourne, Jr., 

Washington, D. 0. 

• 

My Dear Sir : I have received your letter of the 11th ultimo inclosing me a 
copy of Senate bill 7371, embodying a plan recommended by the Post Office 
Department for determining the compensation to be paid to railroad companies 
for the transportation of the mails. 

You are aware that this matter is of so much importance to the railway com¬ 
panies of this country that they have appointed a special committee on railway 
mail pay, which committee has been considering from time to time the various 
phases which this matter has assumed. Of course, the special consideration of 
your letter has been referred to this committee, and I am in receipt of a copy 
of the committee’s communication to you of the 3d instant. 

While I indorse what this committee has transmitted to you, representing 
as it does almost the entire railway mileage of the country, yet I feel that it 
is proper for me to state two general objections to the bill which you submit 
and which would seem to me to be fatal to the bill so far as it is intended to 
provide fair and equitable treatment to the railroads of the country. 

First. The bill provides that the Postmaster General shall apportion the 
revenues and expenses of the railway companies in such manner as to him shall 
be deemed fair and equitable in order that he may determine the cost to each 
railroad company of carrying the mails on its road. 

You, of course, are aware that this imposes upon the Postmaster General a 
task which has not yet been successfully performed by anyone. Although for 
a number of years many of the best minds of the country have studied the 
problem, no conclusions have yet been reached which would justify the formu- 



80 


RAILWAY MAIL PAY. 


Intion of rules establishing any uniform units upon which cost of the particular 
business can be predicated. 

This bill does not provide for any representation by the railway companies 
in the investigations which are intended to bring about a conclusion as to what 
it does cost the particular company to carry the mails, and the only appeal 
that is permitted is to the Interstate Commerce Commission, whose decision 
shall be based upon such papers as the Postmaster General shall furnish to 
the commission and which, in his judgment, are deemed essential to an under- 
st- nding of the method adopted by him in fixing the compensation. 

If the railway companies have any rights which the law shall respect, it 
would seem to me that in so important a matter involving so vast an amount 
of money the railway companies would be entitled to the opportunity to present 
their views somewhere or somehow before a disinterested tribunal. 

All of us must recognize that a zealous Postmaster General is properly inter¬ 
ested in reducing the cost of service in his department, and I take it that in 
approaching the subject from that viewpoint he would necessarily be disposed 
to minimize the cost to the railway companies of performing the mail service. 

Second. The second objection to the bill that seems to me to be fatal is the 
fact that on its face the bill contemplates the partial confiscation of the property 
of the railroads of the country to the extent to which their instrumentalities 
are used in the service of the Government in carrying its mails. 

The only compensation to be*accorded to the railways under the bill is to 
reimburse to them the cost of the service as ascertained by the Postmaster 
General, to which cost is added 6 per cent of such cost. 

I am sure that a moment’s reflection would satisfy any experienced mind that 
in the event all of the business of the railway companies was done on this 
basis, bankruptcy of all the roads would result. It does not seem to me that 
the Government should by law undertake to force upon the railway companies 
a schedule of charges which could not be carried into effect in connection with 
all the business; and the imposition of the scheme, if carried on successfully, 
would simply mean that the shippers of the country would pay for the service 
performed for the Government, and it does not seem to me that the Govern¬ 
ment can properly put itself in such a position. This is not its policy with 
regard to any other service performed for the Government, and I fail to see 
any just reason why a discrimination in this respect should be imposed upon 
the railway companies. 

The proposed act seems to contemplate the doing of the mail service on 
“ force account,” which is a familiar form of service in the simpler contracts 
for labor and material, but I call your attention to the fact that even in those 
contracts the compensation in the ordinary transactions varies from 10 to 25 
per cent on the actual cost of labor and material, the variation being based 
upon the complexity of the machines and instrumentalities incident to the con¬ 
struction of the work and the risks involved. It must certainly appear to the 
fair-minded person that the instrumentalities used by the railway companies 
in performing this governmental service are of a high degree of complexity 
and involve no little risk. 

Very truly, L. E. Johnson, President. 


Pacific A Idaho Northern Railway Co.. 

New Meadows, Idaho . October .9, 11)12. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Senator Bourne: In reply to your communication of September 11, 
relative to Senate bill 7371, embodying a plan recommended by the Post 
Office Department for determining the compensation to be paid to rail¬ 
road companies for transportation of the United States ■ mails, I beg to 
state that I see but little fairness or merit in the bill in question. In my judg¬ 
ment. confirmed, I believe, by the admitted facts, there has at all times been a 
great hardship worked upon the smaller lines of railroad, at least in the adjust¬ 
ment of compensation for space assigned in our rolling stock for the exclusive 
use of the Railway Mail Service. If there is to be a fixed rate, applying alike to 
all mail-carrying roads, the present law, if amended in conformity with House 
bill 4044, prepared by the Short Line Railroad Association, would seem, in 
my judgment, to be equitable to all concerned. 

I believe that the practice of weighing mail at intervals of four years works 
a great hardship upon roads in the West in districts which are developing, as 



KAILWAY MAIL PAY. 


81 


is ours, very rapidly. As a Western man you will appreciate that the volume of 
mail may ofttimes multiply several times in four years, which places a pioneer 
railroad in the position of carrying for the Government a weight far in excess 
of that upon which its compensation is based. The underlying principle of the 
plan embodied in Senate bill 7371 seems to me to be arbitrary and unjust 
as a basis of compensation. A discussion of this feature involves the broad 
question as to the factors to be considered in determining the cost of carrying 
mail. I understand that the honorable Postmaster General recognizes only two 
factors in computing the cost; that is, operating expenses and taxes; and X take it 
these two items are the only ones considered by him in making his reports to 
Congress in railway-mail pay Document No. 105. The element of capital and es¬ 
sential burdens incident to the upkeep of the road do not appear to be consid¬ 
ered. In addition the Postmaster General is given the power to compute the mail 
compensation on the car-foot miles devoted to the mail service. This would com¬ 
pel a large percentage of the smaller railroads to charge at least 95 per cent 
of the cost of operating the car against the passenger and express service, re¬ 
lieving the mail service from paying its proper proportion of the dead space, and 
this notwithstanding that the dead space for which the Railway Mail Service is 
directly responsible may not be utilized in any way by the railway company for 
other than Railway Mail Service purposes. As a matter of fact and of equity, 
I will state to you that so far as compensation is concerned and dismissing en¬ 
tirely for the time being the questions of public policy and of facilitating the 
mail service in the interest of the communities which we serve, I should be most 
happy as a cold-blooded business proposition to dispense entirely with carrying 
the United States mail upon the basis of compensation which we now receive. 
That being true, it can readily be seen that I could not consistently acquiesce in 
a measure that contemplates a reduction of nearly one-half in that compensa¬ 
tion. It seems to me peculiarly arbitrary, unjust, and unreasonable to stipulate 
“ that it shall be unlawful for any railroad company to refuse to carry the mails 
at the rate of compensation provided by law, when and for the period required 
by the Postmaster General so to do.” The fine of $5,000 for refusal is also un¬ 
reasonable, unjust, and unfair. 

To conclude, if the postal rates now in effect can not be amended to conform 
with House bill 4044, then it would seem to me to be fair and reasonable and 
in the interest of all concerned to repeal the existing laws governing the com¬ 
pensation to railroads for the carrying of mail and to place the entire matter of 
compensation for such service in the hands of the Interstate Commerce Com¬ 
mission. 

There is another feature involved which is worthy of consideration and which 
should appeal to the sense of fairness of any Western Representative or Sen¬ 
ator; that is, that conditions differ very widely as between railroads in different 
parts of this country, and that what might be fair and equitable as applied to a 
railroad in a densely populated district, might, and probably would be, dis¬ 
tinctly unfair and unreasonable as applied to a pioneer railroad in the growing 
West. 

You will doubtless agree with me that whatever views we may hold upon 
various questions involved in the treatment of public-utilities corporations or 
common carriers, the fact remains that new railroads and extensions of lines 
already existing are absolutely essential in order that the Western States, now 
in the throes of development, shall achieve their fullest destiny. In the case of 
transcontinental railroads, you will appreciate that the through traffic in which 
they participate is an important item in revenue. In the case of local or feeder 
lines, they are dependent exclusively upon the development of their local dis¬ 
trict for their revenue, and the basis of compensation by the Government for 
any service rendered to it should be so adjusted in the best interest of the 
people at large so as not to discourage the investment of capital, which has the 
world as its field of operation in additional railroad construction in the thinly 
settled West. 

Yours, very truly, E. M. Heigho. 


Paul Smith’s Electric Light & Power & Railroad Co., 

Paul Smiths, N. Y., September 16, 1912. 

Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Replying to your letter of the 11th instant, inclosing Senate bill 
7371, we feel that $42.75 per mile of trackage per annum for hauling mail is 


74972—33-6 




82 


RAILWAY MAIL PAY. 


fair to both the Government and the railroad company, considering the space 
occupied and the weight carried. 

Very truly, yours, 

Paul Smith’s Electric Light & Power & Railroad Co. 


[Atlantic City Railroad, Catasauqua & Fogelsville Railroad, Gettysburg & Harrisburg Railway, Northeast 
Pennsylvania Railroad, Perkiomen Railroad, Philadelphia & Chester Valley Railroad, Philadelphia & 
Reading Railway, Philadelphia, Newtown & New York Railroad, Pickering Valley Railroad, Reading 
& Columbia Railroad, Rupert & Bloomsburg Railroad, Stony Creek Railroad, the Williams Valley 
Railroad.] 

PHILADELPHIA & READING RY. 


Office of Vice President, Reading Terminal, 

Philadelphia, October 15, 1912. 

Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Referring to your letters of September 11, addressed to President Baer 
to each of the above companies, inclosing copy of Senate bill 7371, introduced by you 
by the direction of the Senate Committee on Post Offices and Post Roads, embodying 
a plan recommended by the Post Office Department for determining the compensation 
to be paid to railroad companies for the transportation of mails, and requesting replies 
to inquiries bearing on the present plan, and that introduced in your bill. 

The subject of mail-transportation costs and revenues has been a familiar matter 
since the preparation of data for the Post Office Department in 1909, and I have before 
me a copy of a letter dated October 3, addressed to you by the committee on railway 
mail pay in reply to your inquiries, in advance of a response now in course of prepara¬ 
tion by the committee on House Document No. 105. This communication fairly 
sets forth our views in regard to compensation for the carriage of mails, and we indorse 
the expressions contained therein. We would further ask your attention to the dis¬ 
play of the above companies under transportation of mail, on pages 276 and 277 in 
Document No. 105, which shows a loss from mail services for the month of November, 
190ft, of $3,652.81. This loss is against a total monthly revenue from mail service 
during that period of $11,797.66, and while this shows a large percentage of loss, we feel 
that the basis under which the car-foot miles were arbitrarily developed by the Post 
Office Department in preparing these statistics of cost does not equitably state our posi¬ 
tion in cost of carrying mail. 

Briefly, the plan followed by the Post Office Department in producing the car-foot 
miles in mail service of 3,270,478, as shown in Document No. 105, shows that they 
made an arbitrary assignment of space in apartment cars on basis of space reported 
by Railway Mail Service as being necessary for that train, and in closed-pouch serv¬ 
ice an arbitrary assignment of space was made based on weight, which was produced 
on an average fixed weight for each mail pouch and sack. 

The figures submitted by this company in its reports were 5,226,386 car-foot miles, 
and were on a basis of space in apartment cars, and space in closed-pouch service in 
baggage and combination cars, and the space used by each mail, baggage, and express 
in apartment, plus the proportion of dead space each bears to the total of the space 
occupied. 

We feel it is necessary to provide carrying facilities in the several branches of the 
passenger service both as to space in car apartment to properly care for and expedite 
the handling of the several classes of matter, and in the seating capacity of coaches 
to care for the traveling public, and that each of the several classes of matter take 
care of its proper proportion of dead or unused space. This arbitrary assignment of 
space by the Post Office Department resulted in the reduction of 1,955,908 car-foot 
miles, or 37.42 per cent. 

The above is respectfully submitted for your consideration. 

I am, yours truly, 


Theodore Yoorhees, 

Vice President, President Williams Valley R. R. 


The Pittsburgh, Lisbon & Western Railroad Co. 

Lisbon, Ohio, September 21, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 


Dear Sir: I beg to acknowledge the receipt of yours of the 11th instant, 
submitting copy of Senate bill No. 7371. This bill I have read. I am now 
unable to state whether it would afford the relief that seems to be due to the 
short-line railroads. 




RAILWAY MAIL PAY. 


83 


This company carries United States mail over 25 miles of road on four trains 
each day, and received therefor $1,566.52 per annum, less fines. This makes 
practically $5 per day. The space required in the car is about 64 square feet. 
For this space, carrying the mail and the clerk, the company received about 
5 cents per mile. 

I am advised that operations of many other short lines show about the same 
results. It seems to me that every one must concede that this compensation is 
clearly inadequate for the service rendered. Out of the compensation received 
the railroad company is required to pay about $10 per month for delivering 
mails from railroad stations to post offices. 

I trust that some plan may be arrived at which will confer upon the Post¬ 
master General authority to put the short-line railroads on a more equitable 
basis, 

Yours, truly, N. B. Billingsley, President . 


Hon. Jonathan Bourne, Jr., 

Washington, D. C. 


Raritan River Railroad Co., 
Jersey City, N. J., September 19, 1912. 


Dear Sir : Replying to your circular letter of September 11, instant, beg to 
advise that this railroad handles a very small amount of mail matter between 
South Amboy, N. J.—our junction point with the New York & Long Branch 
Railroad—and Parlin, N. J. (There are no intermediate post offices on oui 
line between these two points.) 

The distance is 4 miles, and we receive, at the present time, $15.67 monthly 
for this service. 

Owing to the insignificant amount of this traffic, we do not feel that we are 
in a position to express an opinion as to an equitable method to be pursued 
in compensating railroad companies for carrying mail matter. 

Very truly, yours, 


Wm. G. Bumsted, President. 


Roaring Fork Railroad Co., 
Blackivood, Va., September 14, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. G. 

My Dear Sir : We have your letter of September 17, inclosing copy of Senate 
bill 7371, indorsed by you, embodying a plan for determining the compensation 
to be paid to railroad companies for the transportation of the mails. 

In reply to the first question, we do not believe that the present plan is an 
equitable one, for the reason that the small roads do not receive adequate 
compensation and the larger systems are very much overpaid. 

2. We believe bill 7371 is very proper, and we have no comments to make 
on it. 

3. It is a very hard matter to determine on a desirable plan for compen¬ 
sating railroad companies for transportation of the mails. I believe that this 
question could be submitted to an impartial board, who would secure all 
necessary data, and then could determine a fair and just compensation. 

Yours, very truly, 

Roaring Fork Railroad Co., 

By C. J. Cutting, General Manager. 


Seaboard Airline Railway, 
Norfolk, Va., October 21, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. G. 

Dear Sir: I beg to submit the following replies to interrogatories contained 
in your circular letter dated September 11, addressed to the president of this 
company: 

1. The basis of the present plan of compensation is fair in principle, but the 
law has been supplemented by so many regulations and administrative require¬ 
ments that it does not provide fair compensation to railroads generally, as 
shown by data compiled by the committee on railway mail pay in answer to 
' Document No. 105, Sixty-second Congress, first session. 





84 


RAILWAY MAIL PAY. 


2. The underlying principle of the plan embodied in Senate bill 7371 is not, 
in my opinion, a proper basis for compensation. No rate is or ever has been 
based upon cost of operation. Such a plan presents many varying and not 
readily determinable conditions which would give rise to almost insurmount¬ 
able difficulties. It would place a premium upon inefficiency and a very great 
accounting burden upon the railroads. It does not provide for any return 
whatever upon investment, which return is absolutely necessary to the preserva¬ 
tion of corporate existence. 

The operating expenses and taxes of the railroads for the year ended June 
30, 1910 (see Interstate Commerce Commission report), amounted to $1,920,- 
665,026; 6 per cent of that amount is $115,239,922, whereas for interest, rentals, 
etc., for the same period $560,905,952 was required. It will therefore readily 
appear that the plan advocated by the Postmaster General and proposed in 
Senate bill 7371, if applied to all the business of the railroads, would produce 
only 20.55 per cent of the amount necessary to keep them out of the hands of 
receivers. It is scarcely conceivable that Congress would wish to fix a rate 
for the transportation of mail on railroads which would make the mail service 
a tax upon every other service rendered by them. 

The collection and preparation of the data contained in Document No. 105 re¬ 
quired nearly two years’ time. We may fairly presume each annual adjust¬ 
ment under the plan proposed would not require less time, would be influenced 
more or less by administrative policy, give rise to more or less contention, 
and must, of necessity, place the railroads in a position where they would 
never be able to tell what they are to receive for the service they perform, 
while Congress would be called upon to appropriate money on a speculative 
basis. 

The practically unlimited authority which it is proposed in the bill to confer 
upon the Postmaster General as to the determination of cost and administration 
are as objectionable as the principle involved. These objections are well set 
forth in an article over your signature in the August number of the Review of 
Reviews. 

3. In their answer to Document No. 105 the railroads have shown that com¬ 
pensation for mail transportation is not remunerative as compared with other 
elements of passenger-train revenue. They have frequently demonstrated in 
passenger-rate cases that earnings from passenger service are not excessive. 
Our conclusion, therefore, is that reductions in pay for the transportation of 
mails on railroads by acts of Congress and by Executive orders have not been 
justified by the evidence presented; that the rates provided by the law of 1873 
(R. S. 4002) should be restored; that pay for railway post-office cars, as pro¬ 
vided in Revised Statutes, 4004, should be restored; and that pro rata space pay 
should be allowed for mail apartments in cars. The law should be definite and 
specific in terms, limiting service to rail distance and relieving railroads of 
burdensome regulations and requirements at present enforced by fines and 
deductions, which are not incident to any other class of transportation. 

Very truly, yours, 


Chas. R. Capps, Vice President . 


Sierra Railway Co. of California, 

Jamestown, Cal., October 16, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Referring to your letter of September 11, addressed to Mr. T. S. 
Bullock, requesting views of this company as to the merits of Senate bill 7371 
as applying to railway mail pay. 

I am in receipt of a copy of the letter addressed to you under date of Octo¬ 
ber 3 by the committee on railway mail pay, and same embodies the views of 
this company in the main. There are one or two points in which I would go 
farther than the stand taken by the committee. 

Clause T), question 1 .—In the committee’s reply they desire a fair allowance 
to the railroads for the side and terminal messenger service which they per¬ 
form for the Post Office Department. In my opinion the railroads should be 
relieved of this service altogether. It is not a question of railway transporta¬ 
tion in the general sense. Carriers do not perform this or a like service for 
other patrons of the road, and I see no good reason why the Government should 
not make other arrangements for this service. 



RAILWAY MAIL PAY. 


85 


Paragraph E, question 1 .— The committee say, “ That all rates of pay should 
be definite and not subject to the discretion of the officers of the Post Office 
Department.” On this point I would particularly specify that no penalties 
should be exacted from the carriers on account of delays or failures to handle 
the mails except in cases where such delayed mail may be diverted over other 
routes. I see no reason for penalizing a carrier simply for the reason they are 
a few hours late or did not move the mail on a specific train when the service 
is performed later. 

The mail is transported by the railroad lines. The persons receiving the 
mail are not allowed anything by the Government for the delay, and it is only 
an arbitrary reduction going to the credit of the Government and does not 
in that sense correspond with other railway transportation. 

Yours, very truly, S. H. Smith. 


Hon. Jonathan Bourne, Jr., 

Washington, D. G. 


South Georgia Railway Co., 
Quitman, Ga., October 7, 1912. 


Dear Sir: Replying to your letter of recent date in reference to the cost of 
handling the mails via our line. 

I will say that the pay is entirely inadequate and but for the interest of the 
people along our line we would not consider the expense of equipment and cost 
of handling at the price we receive. 

To inconvenience the people from whom we get our living would, of course, 
react upon us and for that reason we continue the hardship. 

I would respectfully call your attention to detailed answers to your questions 
made by Mr. Ralph Peters, acting chairman of committee on railway mail pay 
of various lines, which I think fully covers most all phases of this matter and 
I fully indorse what he says in answer to your questions. 

Yours, truly, 


J. W. Oglesby, President. 


South Georgia Railway Co., 
Quitman, Ga., October ll h 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. G. 

Dear Sir: As a supplement to my previous letter in reference to mail com¬ 
pensation. 

We have been reduced $50 per month in compensation for handling mail over 
our 77 miles of road under the last weighing period. They claim that we are 
handling less mail than we handled four years ago, while our territory is con¬ 
stantly growing and we can show by every postmaster along the line that he 
is handling more mail to-day than he has ever handled. 

I will be glad to have the committee investigate the rather peculiar condi¬ 
tions that exist at the present. 

Yours, very truly, J- W. Oglesby, President . 


St. Louis Southwestern Railway Co., 

St. Louis, November 29, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: I have to acknowledge receipt of your letter of September 11, 1912, 
inclosing a copy of Senate bill 7371, and requesting views upon three specific inquiries 
on the subject of railway mail pay, which, with answers thereto, are contained in a 
memorandum attached. 

The real issue is whether the railroads are overpaid or underpaid for mail trans¬ 
portation The railroads have been protesting, since 1907 particularly, that they 
were underpaid, and that reductions of about $8,000,000 per annum made m that 
year were unjust to them, and that some form of adjustment should be made. 

The Senate Post Office Committee Report No. 955, Sixty-second Congress, second 
session July 23, 1912, page 25, which accompanied the Post Office appropriation bill, 
stated that “the committee is of the opinion * * * that the rates are excessively 

k^This view, presumptively, is founded upon the report of the Postmaster General, 
Document No. 105, wherein he purports to show that the railroads are overpaid 





86 


KAILWAY MAIL PAY. 


$9,000,000 per annum, which might be saved by enactment of a bill proposed by him 
and introduced by your committee as Senate bill 7371. 

There is no proof in his report that the railroads are overpaid; on the contrary, even 
superficial analysis explodes any such theory, because the methods employed in 
making his deductions are fatally in error and fortunately easily demonstrated. 

His first serious error is in overlooking the right of railroad property or capital to 
earnings, which is a recognized primary and constitutional factor in all rate cases. 

This property is, of course, of enormous value, as follows (I. C. C. Report, 1910): 


Represented by funded debt. $10, 303,474, 858 

Stock. 8,113,657,380 

Total. 18,417,132,238 


This represents the plant, which, of course, must exist to enable the railroads to 
perform mail and other transportation services. It is almost too apparent to allude 
to the effect of such a policy. If applied generally to railroad or any business it would, 
of course, bankrupt and destroy them. 

His second serious error consists in arbitrarily and erroneously cutting out millions 
of car-foot miles used directly or incidentally in performing mail service, as reported 
to him by the railroads in the reports he used and changed to the extent of approxi¬ 
mately 28 per cent. As the proportion of car-foot miles is the essential and material 
factor*in his calculations, his erroneous action in not only cutting out such mail car- 
foot miles but changing the same instead to passenger car-foot miles is fatal to any 
theory that the railroads are overpaid. 

His third serious error is in dismissing without any consideration, either as to costs 
or compensation, the extensive and valuable service rendered by the railroads in per¬ 
forming what is commonly known as “messenger service,” and which is the carrying 
of mails between the railroad stations and the post offices where the latter are within 
one-quarter mile of the station. This is not a natural function of the railroad company, 
because it does not handle passengers, baggage, freight, or express beyond its stetion 
property, but is an extra service which the railroads perform, and saves the Post Office 
Department from employing 30,000 to 40,000 contract messengers, and which saving 
former Postmaster General Meyer reported to the Senate committee amounted to 
$4,393,000 per annum. A service of so great value is ignored in treating railway mail 
pay generally and in the calculations made in Document No. 105. 

It is obvious that the railroads are not overpaid, as that document indicates, and no 
foundation exists for such opinions which may be based thereon. On the contrary, 
the reports which the Post Office Department required of the railroads demonstrated 
that they were very greatly underpaid for mail service—perhaps best illustrated by 
figures which th& Postmaster General does not appear to have submitted in his report, 
namely: That mail space earned only $3.23 per thousand car-foot miles, whereas the 
passenger space earned $4.42 per thousand car-foot miles. This indicates underpay¬ 
ment to the railroads of over $16,000,000 per annum, according to figures compiled by 
the committee on railway mail pay. 

Unfortunately and prejudicially to their interests and justice there has always 
seemed to exist a feeling that the railroads were paid excessively for carrying the 
mail. Such views have not been founded upon any competent inquiry but upon 
mere assertion. It has been no uncommon thing to notice newspaper items asserting 
it and having the effect of creating public sentiment in that direction when there 
has been nothing substantial in the way of official evidence to support such assertion. 

The annual amount of railway mail pay has only seemed large and attracted atten¬ 
tion, because it represented the largest single item in the Post Office appropriation 
bill, and without full consideration of the immensity of the service rendered by the 
railroads receiving it, not only in the transportation throughout the year on all the 
railroads, and practically on all of the train service of the country, but in hauling 
post offices in addition on this mileage, for the distribution of the mail while it 
was in transit, and for the performance of other incidental services. 

The Government collected, in 1910, $224,128,637.12 in postage, yet for the above 
service by the railroads only paid $49,405,311.27, while on the other hand, it paid 
over $170,000,000 for the function of collection and delivery of that mail and the 
administration of the postal service. In other words, the railroads received about 
22 cents out of the dollar the Government collected in postage for the transportation 
of the entire mail, whereas, the Government used about 78 cents for collection, 
delivery, and administration. 

In the past 10 years, the amount paid the railroads in proportion to postal revenue 
has been very steadily decreasing from 34 to 22 cents per dollar, while the collection, 
delivery, and administration cost during the same time has increased from 66 to 
78 cents per dollar. There is nothing in these facts to support any theory of over- 






RAILWAY MAIL PAY. 


87 


pay to railroads. In reality, railway mail pay, instead of representing a large pro¬ 
portion of railroad revenue, is indeed very small. In 1910 it only amounted to 1.78 
per cent of gross revenue, while the roads had to depend upon freight, passenger, 
and express business for 98.22 per cent of revenue. The railway mail pay does not 
even equal one-half of the taxes alone which the railroads pay. 

The only thorough inquiry previously made on the subject of railway mail pay 
was by the commission of 1898, which, after two years’ study, and voluminous testi¬ 
mony, reported as follows: 

“Upon a careful consideration of all the evidence and the statements and argu¬ 
ments submitted, and in view of all the services rendered by the railways, we are of 
the opinion that ‘the prices now paid to the railroad companies for the transportation 
of the mails’ are not excessive and recommend that no reduction thereof be made 
at this time.” (52d Cong., 2d sess., S. Doc No. 89, pp. 19, 22, 25, 29.) 

It demonstrated then that there was no foundation for the sentiment of overpay 
that existed, based upon mere assertion, and which culminated in the appointment 
of the commission. Notwithstanding, a further agitation of the subject arose in 1907, 
with disastrous, and, as we believe, decidedly unjust results to the railroads. 

Congress had the subject before it, and by act approved March 2, 1907, reduced the 
railway mail pay $2,723,000 per annum, cutting the pay on weights and full postal 
cars. No sooner, however, was this done, in fact on the day the act was signed by the 
Executive, the Postmaster General issued Order 165,commonly known as the “divisor 
order,” which cut the railway mail pay $4,941,000 per annum more than Congress, by 
its own action at that time, regarded as justifiable. 

The railroads have been protesting this double method of reduction from two 
sources was decidedly unjust and far beyond the wishes and action of Congress at that 
time. 

Instead of a reduction of $2,723,000 per annum, designed by Congress, an actual 
reduction of $7,664,000 has been made. Included in the reductions made by Congress 
w r as a cut in the pay of full postal cars, which at that time were of wooden construc¬ 
tion. Since then not only has Congress required the reconstruction of the wooden cars 
to standards, but at the last session provided for their retirement and replacement by 
all steel equipment, and without any provision whatever for compensation to the rail¬ 
roads—certainly the higher class of equipment required—and the expense of substi¬ 
tuting it for wooden cars, which must be abandoned, for a sufficient businesslike basis 
for a restoration of the rates that were in effect prior to the cut of 1907. 

It. is hoped the commission, of which you are chairman, will recommend a restitution 
to the railroads of these reductions in the form of an annual weighing, pay for mail 
apartment car space, and compensation for messenger service. 

The fairness of such action is especially emphasized at this time, by the inauguration 
of the parcel post on January 1 next, which apparently will increase the volume of 
mail, and for which no provision in the way of compensation has been made to railways, 
although such provision has been made to increase the pay of rural carriers, star-route 
carriers, and messenger service. 

The principal service in connection with parcel post will be that performed by rail¬ 
road companies in its transportation over the immense mileage of the country, and the 
justice of an equitable method of pay will, no doubt, appeal readily to every Member of 
Congress, as it can not be expected that it will be transported by the rad roads for noth¬ 
ing while the Government is collecting a revenue thereon, and considering that the 
railroads at the present time are being compensated for its transportation as express. 

The Post Office Department, as a result of the complaints of the unjust reductions 
in 1907, called upon the railroads for information and statistics on forms which it had 
sent out. The railroads, with the object of assisting in collection of the data, correctly 
and promptly designated a committee on railway mail pay to assist and to study the 
results. 

The committee, on behalf of the roads, has answered the three inquiries contained 
in your letter, in which views I fully concur. 

For convenience, there is attached a copy of the questions and answers thereto 
submitted by the committee. 

Yours, very truly, F- H. Britton, 

President and General Manager. 


Susquehanna, Bloomsburg & Berwick Railroad Co., 

Watsontown, Pa., October 12, 1912. 


Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Referring to your recent letter, accompanied with Senate bill 7371, 
upon the subject of determining compensation to be paid railroad companies for the 
transportation of United States mail. 



88 


RAILWAY MAIL PAY. 


We have read over the bill carefully and also your letter upon the subject. It 
recalls to us a former communication addressed to Mr. Joseph Stewart, Second Assistant 
Postmaster General, Post Office Department, Washington, D. C., dated January 12, 
1910. This letter was accompanied with statements in detail, showing the cost to 
this company for carrying United States mail. 

I may say that our mail route is short, viz, 22.7 miles. Our passenger train con¬ 
sists of one compartment car for mail and baggage and one passenger coach. The 
baggage end of the compartment car is used daily for baggage, express, and local freight. 
The mail compartment is used exclusively for United States mail and a mail clerk. 

At the time the above-mentioned letter was written to Mr. Stewart it was upon his re¬ 
quest that we furnish the information covering one month’s period, viz, from midnight, 
October 31, to midnight, November 30, 1909. Conditions at the present time do not 
vary much from that date. This estimate was worked out upon a per square foot 
of floor space basis, covering the distance mails were carried, and includes all items 
which we consider properly chargeable to the mail portion of our business. These 
figures show that it cost this company for the month of November, 1909, $182.10 for 
the mail-carrying portion of our business. We received from the Government for this 
service $97.93. It will be noticed, therefore, that this service is being handled by 
our company at a loss of nearly $100 per month, figured upon the exclusive use of the 
the floor space necessary to handle the mail. 

We believe this estimate to be not far from correct, and if this is true there is no doubt 
we are much underpaid for the mail service on our line. 

Conditions, no doubt, vary considerably upon different lines and a rate for com¬ 
pensation that might suit here may not fit the conditions elsewhere. From lack of 
better information I would hesitate about expressing an opinion as to fixing upon a 
uniform rate to cover all cases, and we therefore believe it proper to confine our views 
to conditions and facts on our line as we find them. Our opinion is that we should 
receive for the mail service on our line actual cost, as already worked out, plus 25 per 
cent—or in other words $227.62 per month for the service, as it is now performed on 
mail route 110166 on our line. 

For the above reasons we wish to reply to your inquiries as follows: 

(1) Do you deem the present plan of compensation an equitable one as between the 
Government and the railroads? If not, in what respects and as to what classes of 
railroads is it inequitable? 

Answer. No, sir. 

(2) Is the underlying principle of the plan embodied in the inclosed bill a proper 
basis for compensation? If not, wherein is it improper, and why? 

Answer. I hardly think so, for reasons explained in the accompanying letter. 

(3) What in your-opinion is a desirable plan for compensating railroad companies 
for transporting the mails? 

Answer. Owing to the variations in the character of the service between long and 
short lines, I believe a fair basis upon which to adjust rates for carrying the United 
States mail to be as we have previously worked it out, viz, ascertain as nearly as possi¬ 
ble the actual cost, to which should be added a fair remuneration for the railroad com¬ 
pany, and we do not believe 25 per cent of the cost to be out of the way. 

We make this suggestion for the reason that all materials, repair work, renewals, 
etc., we purchase carry with them profits of approximately 25 per cent above the 
actual cost of producing such articles. 

For your information I beg to inclose herewith copy of our letter, dated January 12, 
1910, addressed to Mr. Joseph Stewart, Assistant Postmaster General, and statement 
of cost of handling mail route upon our line No. 110166, made up on Post Office De¬ 
partment form 2603. 

I wish to call attention to a point mentioned in this letter which we discovered 
after sending it, viz, the last 14 words in the letter on the last two lines should have 
been omitted, and the letter ended with the word “Millville.” We included in our 
estimate (copy attached) 7 per cent of the general office and clerks’ expenses as applied 
to mail service. This, however, does not alter the figures in estimate. 

Yours, truly, 


S. B. Haupt, 

President and General Manager. 


[Form 2603.] 


Name of system reporting: Susquehanna, Bloomsburg & Berwick Railroad Co. 
Railroad mail route covered by the system, 110166. 

Train mileage of passenger traffic (covering all passenger and baggage, express, and 
mail service), 4,576. 

Car mileage of all passenger equipment (including all cars, passenger and baggage, 
express, and mail), 9,152. 6 * 


RAILWAY MAIL PAY. 


89 


Total revenue received from passenger traffic (not including mail and 


Total revenue from express service. ’ 36.12 

Total revenue from mail service. 97 . 93 

Total operating expenses (including passenger, mail, express, and freight). 9 , 656.04 
Total passenger operating expenses, covering all passenger and baggage, 
express, and mail service. 1 , 279.10 


Assignable expenses. 

Fuel for locomotives. 246. 75 

Repairs to passenger cars. 20 . 00 

Locomotive repairs, one-seventh of total.. 88 ! 15 

Oil, tallow, and waste ; one-fifth of total. 7 .17 

Fuel for coaches, estimated. Heated by locomotive and included in 

locomotive consumption . .. 25.00 

Taxes on gross receipts. 8 . 54 

Wages of enginemen, conductor, baggageman, and watchman. 316. 00 

Man carrying mail at Watsontown. 5 . 00 


716.61 

Proportion of nonassignable expenses. 


5 per cent on value of passenger equipment, $10,795.37. 44. 98 

Proportion of— 

Maintenance of roadway, 7 per cent. 216. 50 

Superintendence, 7 per cent.. 7 . 70 

Station agent, 7 per cent. 29. 97 

General office, 7 per cent.'. 24. 50 

General office clerks, 7 per cent... 12 . 95 

General expenses, 7 per cent.. 8 . 24 

Stationery and printing, estimated. 2 . 50 

Water rent, one-fifth of total. 9 . 95 

Interest on mortgage, 6 £ per cent. 189. 60 

Taxes on capital stock, 6 £ per cent. 15. 60 


562. 49 


Watsontown, Pa., January 12,1910. 

Joseph Stewart, Esq., 

Second Assistant Postmaster General , 

Post Office Department, Washington, D. C. 

Dear Sir: Your favor of November 22 , accompanied with inclosures, including 
blank forms, letters of instruction, etc., relating to receipts and expenditures of rail¬ 
roads for carrying United States mail, came duly to hand. 

We have recently closed our figures showing general operating expenses and gross 
receipts for the month of November, so that we are now able to work up such data as 
we hope may be satisfactory for the information you desire. 

We find it difficult to separate the cost of carrying the mails from the total cost of oper¬ 
ating the passenger train absolutely. Our regular passenger train is made up of one 
coach and one combination car. 

Seventeen feet of the combination car is used for United States mail purposes, includ¬ 
ing mail clerk. It may be proper to calculate on the use of 12 feet of the combination 
car only, that being the length specified as being absolutely necessary by the post- 
office authorities. The reason we use 17 feet is because the car came to us that way 
and we did not wish to alter the partition. 

While we have endeavored to give the information in full as called for in your 
blanks, we desire to add some additional information throwing light upon the sub¬ 
ject from another standpoint. The total floor space of our passenger train, including 
one coach and one combination car, is 806 square feet. Of this, 110 square feet are 
used exclusively for United States mail purposes. 

The total cost of operating our passenger train for the month of November, 1909, was 
$1,279.10, as you will note in statement. This makes the cost per square foot $1.59. 

Figuring upon this basis we would find the cost of handling the United States mails 
for the month of November as follows: 


110 square feet used in mail compartment car at $1.59 per square foot. $174. 90 

Messenger for carrying mail at Watsontown, $5 per month. 5.00 

































90 


RAILWAY MAIL PAY. 


Time of agents, Ottawa, Strawberry Ridge, and Millville, occupied in han¬ 
dling mails. $2.20 

This would make the total cost for handling the mails for the month of November 
$182.10. For this service our company receives from the Government $97.93 per 
month. 

The above figures do not include anything for the hauling of the mail clerk four 
times daily between Watsontown and Millville or the time given to the service by the 
management and general office clerks. 

Yours, truly, S. B. Haupt, General Manager. 


United Verde & Pacific Railway Co., 

Jerome, Ariz., September 20, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: In reply to your letter of September 11, relative to S. 7371, I beg to 
state that in my opinion this bill is grossly unfair and would work a very considerable 
hardship on railroads. The question is undoubtedly a very complicated one and 
should, I believe, involve equations other than the mere cost of transportation plus a 
6 per cent profit thereon. Under the regulations of this bill no account seems to be 
taken of the cost of equipment and other facilities, nor the revenue haul displaced by 
mail and mail equipment unless, of course, these phases would be taken into consid¬ 
eration by the Post Office Department in determining cost of handling mail. 

A railroad company should not be expected to sell its transporation, even to the 
Government, at a loss, nor at anything but a reasonable and just profit. In deter¬ 
mining such profit not only the cost of the actual equipment used in the Railway Mail 
Service, together with the operating expense should be used, but that proportion of 
cost of motive power, track, and other facilities which mail equipment beais to all 
other equipment, should be capitalized and the resulting figure computed in the 
expense of operating mail. While these matters may be taken into consideration 
under the terms of the inclosed bill I do not deem these terms sufficiently explicit, 
and in order definitely to provide for such consideration I believe the bill should so 
state in plain and unmistakable language. 

I believe also that short line railroads should be allowed a higher minimum than 
$25 per mile per year; especially should such allowance be made on mountain roads, 
where only limited tonnage can be handled and where operating and maintenance 
expenses are very high. Not only should cubic space of mail actually handled be 
considered, but cubic space required for possible necessities should be taken into 
consideration, and a fair and reasonable return made accordingly. 

Rates based on average operating costs and figured accordingly on a milesge basis 
are inherently wrong. Every rate made should be based on individual character¬ 
istics with, of course, sufficient leeway to meet competition and other local conditions. 
Mail contracts should be given little consideration. 

Yours, truly, 

Will L. Clark, Second Vice President. 


Virginia-Carolina Railway Co., 
Abingdon, Va., September 14, 1912. 

Senator Jonathan Bourne. Jr., 

Washington, D. C. 

Dear Sir: Your circular letter 11th, asking opinion on bill 7371. 

I have read the bill, but it is so drastic and autocratic that it is almost lese majestie 
to criticize it. The first difficulty is to find the actual cost of carrying the mail. 
The greatest experts in the world have never been able to properly figure the cost of 
transportation. Especially difficult will it be to find the actual cost of moving under 
the special requirements of standard metal cars, depot space, room for post-office 
employees, etc., required in addition to the actual transportation. 

The movement over the larger lines could, no doubt, be discussed by the managers 
of those lines much more ably than I could after extended study. Ours is a short 
line, and the compensation received by such line is entirely inadequate. I do not 
doubt but that very many of the short lines, like ourselves, would rather be without 
the mail than to have to handle it as at present. 

In the first place the arbitrary rate is unremunerative and in the second place the 
requirement of short lines to deliver the mail pouches to the various post offices along 
the line within the limit of 40 rods for intermediate points and to terminal points, 
whatever the distance. 





RAILWAY MAIL PAY. 


91 


It seems to us that, in all justice, the compensation to such short lines should be 
increased, and they should be relieved from this burden of delivering to the post 
offices. 

Yours, truly, W. E. Mingea, 

President and General Manager . 

Virginian Railway Co., 

Norfolk , Va., October 24,1912. 

Hon Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir: I beg to present for your consideration the following reply to the 
inquiries made in your letter of September 11 , 1912, viz: 

Question 1 . Do you deem the present plan of compensation an equitable one as 
between the Government and the railroads? If not, in what respects and as to what 
classes of railroads is it inequitable? 

Answer. The present plan of compensation is not fair to the railroads. 

(1) On account of the great length of time elapsing between weighing periods. 
There should be at least annual instead of quadrennial weighing, and there should 
also be a definite and fair method for ascertaining the daily average weights. Under 
the present four-year period of weighing, the railroads carry a certain quantity of 
mail a great portion of the time without any compensation. 

As a case in point: The weighing of the mails on the Virginian Railway took place 
before the road was fully connected up and in operation. On short portions of the 
line only was there any train service. The company protested against the unfair¬ 
ness of rating its pay from the Government for four years in the future upon weighings 
made upon detached portions of the road. No attention was paid to our protests, 
and the injustice has been continued. 

(2) On account of insufficient compensation, or allowance, for the maximum space 
demanded by the Government for postal-car accommodations; that is to say, pay is 
not allowed for all the space demanded. The recently enacted parcel-post law will 
mean greater injustice to the railroads under the present method of compensation for 
the average weight carried, instead of pay for the maximum space demanded. 

(3) On account of requiring the railroads to perform unusual service without any 
pay therefor; we refer to side and terminal messenger service. The railroad is cer¬ 
tainly entitled to proper compensation for work of this kind performed for the Post 
Office Department. The establishment of the parcel post will add to the burden. 

(4) On account of the use of a wrong divisor, the latter having been changed 
unjustly. 

(5) Laws have been enacted requiring steel postal car equipment, resulting in 
increased operating expenses for the railroads, while at the same time the compensation 
for carrying the mail has been reduced. This is not fair nor reasonable. 

Question 2 . Is the underlying principle of the plan embodied in the inclosed bill 
a proper basis for compensation? If not, wherein is it improper, and why? 

Answer. The underlying principle of the plan outlined in Senate bill No. 7371 is 
not correct. A plan based upon operating cost and taxes, with 6 per cent added, can 
not be considered right, there being no allowance for the property employed.^ It would 
penalize the railroads which have the higher physical condition and which give the 
most efficient and valuable service to the Post Office Department. 

Question 3. What, in your opinion, is a desirable plan for compensating railroad com¬ 
panies for transporting the mails? 

Answer. Amend the existing law in a way that would correct serious inequalities 
now existing, some of which have been mentioned in our answer to question 1 , and then 
place upon the same a fair interpretation in its administration on the part of the postal 
authorities. 

Very respectfully, yours, Raymond Du Puy. 


Wabash, Chester & Western Railroad, 

Chester, III., September 14, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: Your favor 11th with copy of Senate bill 7371 received and noted. 

Any legislation proposed by Mr. Hitchcock for payment to railroads for carrying 
mail can safely be condemned without reading. He is notoriously unfair and un¬ 
reasonable. 

The treatment the small roads have received by the Post Office Department for 
many years has been a disgrace and stamps the officials in charge as not only unfair 
and unreasonable but absolutely dishonest. 



92 


KAILWAY MAIL PAY. 


For the treatment this company has received I refer you to the testimony taken by 
the House Committee on Post Offices and Post Roads, of Sixty-first Congress (I think 
it was). As for requiring such roads as this to provide steel cars is absurd. This 
road does not make operating expenses and taxes. It has to be content with second¬ 
hand equipment, discarded by other companies. It can not afford new wood cars, 
let alone steel cars, of the Government specifications. Seventy-five dollars per mile 
is the minimum such roads should be allowed, and even that would barely pay cost 
of the service rendered. They should also be exempt from delivering mail to post 
offices at terminals and at stations. 

No other freight is delivered to patrons, and this is a discrimination that should be 
unlawful. 

Yours, respectfully, C. B. Cole, President. 


Chester, III., October 9, 1912. 

Hon. Jonathan Bourne, 

Washington , D. C. 

Dear Senator: I am in receipt of a copy of letter written you by the committee 
on railway mail pay of the American Railway Association, which I heartily indorse, 
referring to the proposed bill for regulation of railway mail pay. While this answer 
refers in a general way to the objections of the railroads in general, it does not put the 
case as strong as it should be on the part of the short lines. They should have special 
consideration, which I trust will be fully brought out in the hearings I assume will be 
held sometime this next winter. 

Yours, respectfully, C. B. Cole, President. 


Wabash Railroad, 
Chicago, September 17, 1912. 

Hon. Jonathan Bourne, 

Chairman Senate Committee on Post Offices and Post Roads, Washington, D. C. 

My Dear Sir: Your letter of September 11, inclosing copy of Senate bill 7371, 
embodying a plan recommended by the Post Office Department for determining 
compensation to be paid to railway companies for transportation of mails, has come 
duly to hand. 

The receivers desire to aid to the extent of their ability in the general discussion 
of this question*; in fact, we have worked up a good deal of data along this line and 
have supplied it to a joint committee under whose jurisdiction has been placed 
the responsibility of supplying full information to your honorable body. I do not 
understand that you have any objections to our presenting the data in this manner. 

Yours, very truly, 

F. A. Delano, Receiver. 


White Deer & Loganton Railway Co., 

Sunbury, Pa., September 18, 1912. 

Hon. Jonathan Bourne, Jr., 

Washington, D. C. 


My Dear Sir: Replying to your letter of the 11th, we are operating a narrow-gauge 
railroad of 25 miles from White Deer, Pa., to Loganton, Pa., and owing to our limited 
experience do not feel that we can give a full answer to your questions. 

We wish to suggest that for small roads like ours, operating in sparsely settled terri¬ 
tory where traffic is not heavy, the maximum provision, on page 2 of Senate bill 7371, 
of $25 per mile would be a hardship, and we beg to ask that you consider the matter of 
some adjustment of compensation for service furnished such as by our line that will 
authorize a compensation such as would enable the roads to maintain the service, 
and think page 4, $42.50 per mile, would be a minimum in such cases. 

Yours, truly, 


Charles Steele, General Manager. 


Yosemite Valley Railroad Co., 

Merced, Cal., September 28, 1912. 

Senator Jonathan Bourne, Jr., 

Washington, D. C. 

Dear Sir: I have your letter of September 11, addressed to our president, Mr. F. G. 
Drum, which has been referred to us for reply. 

(1) I do not deem the present plan of compensation equitable for all roads and under 
all conditions. In our own case our road was built through practically virgin country 
.and of course the mail carried was very light, but we have developed the business and 






RAILWAY MAIL PAY. 93 

it is rapidly increasing each year and some arrangement should be made on roads of 
this character where more frequent weighing and adjustment could be had. 

# Furthermore, our business is greatest during certain months in the year and at the 
time that the mail is weighed does not cover any of the months in which our business 
is greatest, consequently we do not receive proper compensation for the mail we carry. 

(2) The underlying principle of the plan embodied in the bill is correct, but should 
be elastic enough to meet special cases and conditions such as nearly all small roads 
and new roads have to contend with. 

Yours, truly, O. W. Lehmer. 


Yreka Railroad Co., 

Yreka, Siskiyou County, Cal., November S, 1912 . 

Mr. Jonathan Bourne, Jr., 

Washington, D. C. 

My Dear Sir: I have your kind favor of September 11, 1912, with,reference to 
proposed Senate bill 7371, as regards compensation of railroad companies for handling 
the mails. I beg leave to address a few remarks to you as regards our views in the mat¬ 
ter, which, of course, cover our particular case, as we are situated quite differently 
than the larger roads and, perhaps, some of the smaller roads. We feel that the pres¬ 
ent compensation for the services performed is wholly inadequate, and in the event 
of establishing a $25 per mile maximum revenue, as provided in this bill, such a 
rate would be confiscatory on our part. 

I do not quite understand just how the matter of mileage is arrived at on this pro¬ 
posed basis. Presume, however, it would be based on the round-trip mileage on this 
road, account service rendered both ways. In this event, our mileage being 7.50, 
we could not claim over 15 miles for the double service, which would amount to a 
maximum of $325 for the year’s service. Yreka is a terminal post office, and we are 
compelled to transport the mail from our depot to the post office, approximately 
one-half mile distant. The mail transported by team includes the Yreka mail, as 
well as the mail for 19 tributary post offices which goes through that office. 

This mail approximates 14,000 to 16,000 pounds monthly, and, taking into consid¬ 
eration the mail delivered from the post office to the depot here in Yreka, we are called 
upon to handle approximately 20,000 pounds of mail by wagon each month, besides 
deliveries three times daily at Montague post office and handling at Yreka and Mon¬ 
tague stations and transporting over our line, 7.50 miles each way three times daily. 
For this service we are allowed $46.21 monthly, not deducting any fines the postal 
department may feel disposed to impose upon us. Mr. H. Schock, who has been in 
the dray business here ever since the road was first established, has transported the 
mails between the depot and the Yreka post office by handcarts and team. 

This has been for the past 25 years. For this service he was started off with a 
monthly compensation by this company of $10, and at the present time is being paid 
only $12.50 per month. On account of the great increase of all mail during the past 
few years, additional labor is involved, and Mr. Schock is becoming very much dis¬ 
satisfied with the present arrangement, as he states it does not pay him for the time of 
man and team it takes to do the work. This, of course, you realize includes Sundays 
as well as other days, and he oftentimes has a full load of mail, account Sunday being 
one of the heaviest days. While his compensation has been extremely small con¬ 
sidering the service rendered, he realizes we are not in a position to help him much 
at our present compensation, and his desire to help us out in the past has caused him 
to handle the mail at a much less figure than we could possibly obtain from any other 
party. 

Mr. Schock feels quite discouraged under present conditions and is considering 
quite strongly of throwing up the proposition unless he can get somewhere near a, 
reasonable compensation for the service. He feels that he should be paid a mini¬ 
mum of $30 monthly for this service, and we consider this a very fair and reasonable 
demand. Should we be compelled to pay this amount for this service without 
increased allowance from the postal department for this company, we would practi¬ 
cally be giving the service for slightly more than 50 cents per day—a mere pittance. 
I do not believe my predecessor has ever brought this matter up with the depart¬ 
ment, as I feel quite certain that they could readily see that the compensation is 
wholly inadequate. It was my intention to take the matter up with them in the near 
future, and, receiving your letter, I concluded to place the matter before you as I 

ll3VG 

I feel for this service we should be allowed $75 per month, which would enable us 
to pay Mr. Schock $30 for his services, which is, indeed, a very reasonable charge. 
This amount would leave us a fair compensation for services performed, which, on 
the present basis or the one proposed, would be entirely too small for the services 



94 


RAILWAY MAIL PAY. 


rendered. I am giving you conditions as they now exist here and feel that some 
relief should be afforded us. At the present time we are receiving slightly more 
than $1 per day for our services in this matter. 

While I realize that your communication was not directed to us for the purpose of 
procuring a statement of our personal grievances in this mail matter, I have taken 
the liberty to put our case before you in such a manner that you may know our posi¬ 
tion in connection therewith. If there is any further information desired or sugges¬ 
tions you would like to make, I will be pleased to hear from you further. 

Yours, very truly, 

F. A. Reiser, 
Superintendent and Manager. 


DATA ASKED FROM INTERSTATE COMMERCE COMMISSION. 


In order to still further aid the joint committee in the inquiry with 
■which it is charged and to secure the most competent judgment that 
might be had in regard thereto, I addressed the following letter to 
Hon. C. A. Prouty, chairman Interstate Commerce Commission: 


Hon. C. A. Prouty, 

Chairman Interstate Commerce Commission , Washington, D. 


January 3, 1913. 


C. 


My Dear Sir: Under the provisions of an item in the Post Office appropriation act 
of recent session of Congress the Senate and House of Representatives have appointed 
a joint committee to make inquiry into the subject of compensation for the transporta¬ 
tion of mail. This committee has not yet organized, but as a member of said joint 
committee and as chairman of the Senate Committee on Post Offices and Post Roads, 
and under authority of Senate resolution 56, I earnestly desire that the most com¬ 
petent judgment may be had in reference to the subject matter of the inquiry. 

In order, therefore, to aid the joint committee in the inquiry about to be under¬ 
taken, I shall be pleased if your commission will have an analysis made showing the 
relative returns to the railroad companies for the different classes of traffic they handle, 
namely, passenger, freight, express, and mail, approximating as nearly as possible the 
expense to the railroads for handling such respective classes of traffic as compared with 
the earnings received by the railroads from such traffic. 

In connection with the foregoing inquiry, attention is called to the fact that the 
Government for the fiscal year ending June 30, 1912, appropriated for the railway 
post-office car service $5,010,000, of which $4,426,144.16 was expended in that service, 
leaving an unexpended balance as of June 30, 1912, of $583,855.54. Since there is an 
impression prevalent throughout the country that the Government would do better by 
owning and operating its own postal cars, I beg to inquire whether you can and will 
prepare a statement showing what, if any, saving to the Government could be effected 
by governmental ownership and operation of postal cars, taking into consideration 
cost and upkeep of same, covering maintenance, cleaning, duplicating, and allowance 
for depreciation. 

If it is possible to comply with the above request, I shall be pleased to have you 
advise me when the information will be available for the use of the joint committee. 

Yours, very truly, 


Jonathan Bourne, Jr. 


To this letter I received the following responses: 

Interstate Commerce Commission, 

Washington , January 4, 19IS. 

Hon. Jonathan Bourne, Jr., 

United States Senate, Washington, D. C. 

My Dear Sir: Replying to yours of January 3, 1913, in reference to inquiry into 
relative cost of handling mail, express, and passengers, permit me to say that I will 
lay your letter before my associates and write you further not later than Wednesday 
of next week. I do not think we have any figures from which any accurate informa¬ 
tion of the kind for which you asked can be obtained, certainly not any comprehen¬ 
sive information. This subject has been gone into in one or two cases as applied to 
individual railroads or localities. 

Very truly, yours, C. A. Prouty, Chairman. 


BAILWAY MAIL PAY. 


95 


Interstate Commerce Commission, 

Washington, January 7 , 19 IS . 

Hon. Jonathan Bourne, Jr., 

United States Senator, Washington , D. C. 

My Dear Sir: Further replying to your letter of January 3, 1913, in reference to 
cost of handling mail matter in comparison with other passenger-train service. Having 
laid the matter before my associates, I am instructed to say: 

First. The commission now has no figures from which the information asked for by 
you could be compiled. In one or two cases this matter has been incidentally gone 
into, but in so fragmentary and unsatisfactory a manner that we could not, upon the 
strength of what was there developed, express an opinion. 

Second. The commission has no knowledge and no means of knowing the expense 
of maintaining and operating postal cars. Some time ago we sent to Congress some 
information as to the relative cost of maintaining steel and wood cars. 

Third. The commission could, by means of an investigation to be instituted by it, 
probably give you information on both these points, certainly on the first point, winch 
would be reliable, but such a proceeding would require several months, possibly a year, 
and would be somewhat expensive. 

Awaiting your suggestion, I am, very truly, yours, 

C. A. Prouty, Chairman. 

ORGANIZATION OF COMMITTEE. 

As I have already indicated, the Joint Committee on Postage on 
Second-Class Mail Matter and Compensation for the Transportation 
of Mail did not organize immediately after the appointments were 
made, for the reason that the members went home on their summer 
vacations. Organization was delayed after the reconvening of Con¬ 
gress in December by the absence of several of the members. On 
January 6, 1913, I called the members together, at which time there 
were present: 

Senators: Jonathan Bourne, jr., John H. Bankhead. Representa¬ 
tives: J. T. Lloyd, W. E. Tuttle, jr. 

On motion of Mr. Lloyd the joint committee elected Senator Jon¬ 
athan Bourne, jr., as chairman. 

On motion of Mr. Lloyd the chairman was authorized to appoint a 
secretary and to employ such clerical, expert, stenographic, and other 
assistance as he deems necessary. The chairman announced the 
appointment of Mr. Robert H. Turner as secretary of the joint com¬ 
mittee. 

On suggestion of the chairman, Mr. Richard B. Nixon was appointed 
to act as disbursing officer of the joint committee. 

DEPARTMENT MODIFIES ITS PLAN. 

In order that I might bring out the points of difference and a pos¬ 
sible satisfactory adjustment thereof between the parties interested, 
viz, the Post Office Department and the railroad companies, I ar¬ 
ranged for a conference of individuals representing the conflicting 
interests. This conference was held in my committee room on Mon¬ 
day, December 30, 1912, prior to the organization of the committee, 
Hon. Joseph Stewart, Second Assistant Postmaster General, appear¬ 
ing as the representative of the Post Office Department, and Mr. 
Ralph Peters, president of the Long Island Railroad Co. and acting 
chairman of the committee on railway mail pay, Mr. W. A. Worth¬ 
ington, assistant director of maintenance ana operation, Union and 
Southern Pacific Systems, and Mr. V. G. Bradley, general supervisor 


96 


RAILWAY MAIL PAY. 


of mail traffic, Pennsylvania Railroad Co., appearing as the repre¬ 
sentatives of the railroads. At this conference it was suggested by 
Mr. Stewart that the Post Office Department was willing to make 
certain concessions to the railroad companies by modifying in cer¬ 
tain particulars the position taken by it in House Document No. 105, 
and as expressed in S. 7371, heretofore referred to. Influenced by 
this suggestion, I, as chairman of the joint committee, addressed the 
following letter to the Postmaster General: 


January 6, 1913. 

Hon. Frank H. Hitchcock, 

Postmaster General, Washington, D. C. 

My Dear General: Referring to telephonic conversation had with you several 
days ago, in which you stated that the department was willing to make certain con¬ 
cessions to the railroad companies in the matter of railway mail pay by modifying the 
position taken by it in House Document No. 105 and as expressed in the pending bill, 
S. 7371: 

As I understand it, while approving in general the plan outlined in House Document 
No. 105, you are now prepared to recommend certain modifications of that plan in 
these particulars, to wit: 

First. That the Interstate Commerce Commission instead of the Postmaster General 
be authorized to make the primary separation between passenger and freight business. 

Second. That in the matter of car space the railroad companies be credited with the 
maximum space in both directions. 

Third. That in addition to a compensation of 6 per cent of the operating expenses the 
railroad companies, after an apportionment, be credited with a reasonable percentage 
of the capital employed in and relating to the Railway Mail Service. 

The joint committee organized this morning and is anxious to have you indicate 
in writing at the earliest possible date your recommendations modifying the plan as 
outlined in House Document No. 105, with your reasons therefor. 

As prompt a response as the nature of this request will permit is desired. 

Yours, very truly, 

Jonathan Bourne, Jr., 

Chairman Joint Committee on Postage on Second- Class Mail Matter 

and Compensation for the Transportation of Mail. 


To this letter I received the following response: 


Post Office Department, 

Office of the Postmaster General, 

Washington, D. C., January 9, 1913. 

Hon. Jonathan Bourne, Jr., 

Chairman Joint Committee on Postage on Second-Class Mail 

Matter and Compensation for the Transportation of Mail. 

My Dear Mr. Chairman: Referring to your letter of the 6th instant, regarding 
certain proposed modifications of the general plan outlined in House Document 
No. 105 for readjusting railroad mail pay, I have the honor to state that I am willing to 
recommend the following in connection therewith: 

First. That the Interstate Commerce Commission, instead of the Postmaster General, 
be authorized to make the separation of operating expenses between passenger and 
freight services. 

Second. That in computing the car-foot miles the mail service shall be charged in 
both directions for a line of railway post-office cars with the maximum space authorized 
in either direction. 

Third. That in addition to the operating expenses and taxes apportionable to the 
mail service and 6 per cent thereof, companies may be allowed such additional amounts, 
if any be necessary, as shall render the whole a proper proportion of a fair and reasonable 
return on the value of the property necessarily employed in connection with the mail 
service. 

Such modification of the phraseology of the proposed law as may be necessary to 
effect these changes will be prepared as early as practicable. 

Yours, very truly, 


Frank H. Hitchcock, 

Postmaster General. 


RAILWAY MAIL PAY. 


97 


department's reply to railroads. 

On November 30, 1912, I submitted to the Post Office Department 
all answers received from the railroad companies to my circular letter of 
September 11 and asked that the Second Assistant Postmaster General, 
on behalf of the department, furnish the committee his views in 
reply thereto. Under date of January 17, 1913, the Postmaster Gen¬ 
eral addressed a letter to me as chairman of your joint committee sub¬ 
mitting, on behalf of the Post Office Department, a memorandum 
prepared by the Second Assistant Postmaster General. Although 
dated January 17, 1913, this letter was not sent to me by the Post¬ 
master General until noon, January 22. 

This letter and memorandum read as follows: 

Post Office Department, 

Office of the Postmaster General, 

Washington, D. C., January 17, 1918. 

Hon. Jonathan Bourne, Jr., 

Chairman Joint Committee on Postage on Second-Class 

Mail Matter and Compensation for the Transportation of Mail, 

Congress of the United States. 

My Dear Mr. Chairman: I hand you herewith a memorandum prepared by the 
Second Assistant Postmaster General on behalf of the Post Office Department in 
reply to a statement entitled “Mail Carrying Railways Underpaid,” prepared by the 
committee on railway mail pay, representing certain railway companies carrying the 
mails, and submitted to the Joint Committee on Postage on Second-Class Mail Matter 
and Compensation for the Transportation of Mail, and received by the department 
from you informally with request for a reply. 

Yours, very truly, Frank H. Hitchcock, 

Postmaster General. 


Memorandum on Behalf of the Post Office Department in Reply to a State¬ 
ment Entitled “Mail-Carryino Railways Underpaid.” 

Post Office Department, 

Second Assistant Postmaster General, 

Washington, January 17, 1913. 

The pamphlet Mail-Carrying Railways Underpaid, a statement prepared by the 
committee on railway mail pay representing the larger number of the railway com¬ 
panies in the United States carrying the mails and submitted to the Joint Committee 
on Postage on Second-Class Mail Matter and Compensation for the Transportation of 
Mails, and received by the department from chairman thereof with request for a reply, 
has been carefully examined and the statements analyzed. A reply will be made in 
this memorandum to the arguments advanced and attention will be called to the 
important erroneous statements found in the claims of the pamphlet. 

The purpose of the pamphlet is stated to be to show that the department’s estimate 
of cost to the railroads for carrying the mails is far below the real cost and that the 
department’s figures and calculations when analyzed and supplemented demonstrate 
that the mail service has not been fairly remunerative to the railroads. The state¬ 
ments advanced to support these propositions are specifically set forth in the pam¬ 
phlet, but are preceded by a general claim in the following language: 

“Railway mail pay is about to be forced still further below the level of just com¬ 
pensation, unless payments are promptly readjusted, on account of the additional 
volume of mail that will result from the inauguration, on January 1, 1913, of the 
parcel post” (p. 3). 

With regard to this, the department grants the contention of the railroads that they 
should receive additional compensation for the increased weight of mails they wiil 
be required to carry under the operation of the parcel post. 

The Postmaster General has recommended to Congress that in the event that the 
legislation proposed in Document No. 105 be not passed he be authorized to weigh the 
mails on all railroad routes in the fall of 1913 for a period of not less than 30 successive 
working days and to readjust compensation on the routes from the date of commence- 

74972—13-7 




98 


RAILWAY MAIL PAY. 


ment of such weighing. Recommendation has also been made for the additional 
amount of appropriation necessary. It is proposed that the readjustments of compen¬ 
sation, if the authority be granted, shall continue until the commencement of the next 
regular contract term in each section, subsequent weighings and readjustments to con¬ 
form to the present practice of weighing each section once in four years. 

It is believed that the plan recommended is an equitable one and eminently fair to 
the railroads. It has been suggested that by a weighing in the fall and an adjustment 
from the date of the commencement of the weighing period, the companies will receive 
no compensation for parcel post mails carried from January 1, 1913, to the weighing 
period. The fact should not be overlooked that, on account of the impracticability 
of weighing the parcel-post mails separately and adjusting therefor alone, the com¬ 
panies will receive compensation for the increase in other mails for periods of six 
months, one year, one and one-half years, two and one-half years, and three and 
one-half years, according to the section, which they would otherwise not receive until 
the regular contract term began in each section. In other words, in the New England 
States, in the first section, the railroads would receive the additional compensation 
accruing from one year’s increase in the other mails for nearly the entire four-year 
period; in the remainder of the first section they would receive compensation for six 
months’ increase for nearly the same period; in the second section they would receive 
compensation for one and one-half years’ increase in the mails for nearly three years; 
in the third section they would receive pay for two and one-half years’ increase in other 
mails for nearly two years; and in the fourth section they would receive the pay for 
three and one-half years’ increase in the other mails for nearly a year. It is thought 
that these additional amounts received will compensate for the failure to receive com¬ 
pensation for the parcel-post mails carried from January 1, 1913, to the date of such 
readjustment. 

I. 

The first statement in the pamphlet in support of the propositions advanced is as 
follows: 

“The Postmaster General’s erroneous assertion that the railways were overpaid 
‘about 19,000,000’ in the year 1909 rests primarily upon his adopting an unprece¬ 
de ntecTtheory which allows nothing for a return upon the capital invested in railway 
property” (p. 4). 

In support of this the pamphlet advances an argument based upon a consideration 
of the entire operating expenses of all of the United States railways for a year, plus 
the taxes and 6 per cent upon the total, as compared with the total interest of the 
obligations on the funded debt of all of the United States railways for one year, plus 
rentals of leased properties for the same period, and shows that a return equal to the oper¬ 
ating expenses, taxes, and 6 per cent would be insufficient to meet the interest obligations 
and rentals for the entire railroad service. The logic of the argument is that (1) the 
operating revenues should always be sufficient to meet operating expenses, taxes, 
interest on all funded debt, and rentals of leased properties, and that (2) the perform¬ 
ance of mail service by the railroad companies for the United States shall be considered 
upon the same basis as their performance of service for the public. The department 
is not in a position to venture an opinion as to how far the question of interest on 
funded debt should enter into the consideration of rates, but it may be said that there 
are no authorities which have been found that propose the ascertainment of a rate 
purely upon this. In this connection the case of Buell v. Chicago, Milwaukee & St. 
Paul Railway Co., heard before the Railroad Commission of Wisconsin, will shed 
much light. It is said on page 160 of the report as follows: 

“Under normal conditions the owners of a railroad are entitled to a fair return upon 
a fair valuation of their property. This statement raises two questions: First, What is 
a fair rate of interest in such cases? and, second, What constitutes a fair valuation of 
the property involved? Both of these questions are so closely related to other ques¬ 
tions and involve so many problems about which there is more or less dispute that 
any full or adequate discussion of each can not be entered upon here. At the same 
time it is necessary to call attention to a few facts which are more intimately connected 
with these questions. 

“It has been quite generally held that a fair rate of interest is a rate which, other 
things being equal, corresponds to the current market rates on money. This is a 
position with which it is not easy to take issue, for it is quite clear that whatever rate 
money brings in the market is a safe index to what it is generally worth for investment 
purposes. It may also be said, and with a great deal of force, that a fair rate of interest 
for any particular road is the rate of income which its securities bring on their market 
value. The market rate includes the ordinary risks as it is usually considerably 


RAILWAY MAIL PAY. 99 

higher than the rate which is obtained on Government and other securities where 
substantially no risks at all are involved. 

“What constitutes a fair valuation of the plant? Is it the original cost of construc¬ 
tion, the amount at which it is capitalized, the cost of reconstruction new, or the cost 
of reproduction up to its existing condition? The original cost of construction is an 
item that can not generally be ascertained except for relatively new roads. Most of 
the roads were built by construction companies whose records are not in existence, 
and then turned over to some other company at a different value than the original 
cost. Many of the roads are undergoing constant improvements; in fact, some of them 
have been almost entirely rebuilt since the time of their first construction. The 
original cost, as well as the amount that has been expended upon the plant to any 
given date, exclusive of the maintenance, are items that for these and other reasons 
can not be obtained, and which would probably be of little value if they could be had. 

“The capitalization of the roads, or the bonds and stocks issued by them, in most 
cases falls short of being a fair index of a reasonable valuation. The main reason for 
this is found in the manner in which these securities are issued. The railroads are 
often both constructed and equipped by the proceeds obtained from the sales of its 
bonds, while the stock is often thrown in as a bonus. Again, bonds and stocks are 
often issued for other purposes than construction. Many roads, for instance, issue 
securities for the purpose of acquiring an interest in other roads, or in other property 
than that which can properly be considered as a part of their respective plants. At 
times the securities are sold at a discount and the bonds alone may often amount to 
more than the entire cost of the road. For these and other reasons the capitalization is 
subject to great variations. In some cases it may greatly exceed the amount actually 
invested, or what might be a fair valuation of the property. In other cases, again, it 
may correspond quite closely to the true value of the plant, or it may even amount 
to less than this value. From these facts it seems clear that the bonds and stocks 
which are outstanding may not represent what the roads are reasonably worth, and 
the amount upon which they are entitled to a fair return. 

“The cost of reproduction has been suggested as the valuation that might be fair to 
all concerned. This cost includes the value of the right of way, yards, and terminals 
at two and one-half times the prices of adjacent real estate, or at some other price 
ratio. It also includes the cost of buildings and structures of all kinds, new, if con¬ 
structed at current prices of material and labor. It further includes the labor and 
material at current rates for the construction of the road and its equipments, together 
with engineering, superintendence, legal expenses, cost of organization, cost of 
material on hand, freight charges on the material used, etc. In short, it includes every 
item of expense which would be involved in building the road to-day, including the 
interest on the investment during the construction period.” 

In States where public utilities commissions have jurisdiction over public service 
corporations other than steam railways practically a like rule of valuation in con¬ 
nection with rate making is observed. New York may be cited as an example. 
W. H. Lyon, in his work on “Capitalization—A Book on Corporation Finance,” 
states, on page 242, in connection therewith, as follows: 

“valuation of physical property. 

“Information about the method of valuing a corporation’s physical property as a 
basis for rate making comes from two cases. Experts of the commission made an 
appraisal of all the property of the Bronx Gas & Electric Co. This included cost to 
reproduce and depreciation. The commission undertook similar appraisal work on 
the Kings County Electric Light & Power Co. It makes such appraisals either in 
connection with bond or rate cases or in anticipation of reorganization applications. 
The significance of a consideration of cost to reproduce and depreciation will be clear 
after a study of the methods of valuation the Wisconsin commission employs. 

“valuation of property other than physical. 

“In prescribing uniform accounts the commission orders that franchise accounts 
shall be charged only with the amount actually paid to the State for the right, exclusive 
of taxes. Furthermore, the corporation must amortize this amount during the life of 
the grant. It must similarly charge all other intangible assets at their actual money 
cost alone, and must amortize this amount during the life of the asset.” 

The second question, namely, as to whether the same rule as to rate of return for 
service performed shall apply for the United States as for the public, is one which is 
worthy of mature consideration and may be submitted to the congressional commis¬ 
sion for determination. 


100 


RAILWAY MAIL PAY. 


In specific defense of the theory respecting the basis for rate upon which Document 
No. 105 was prepared and submitted to Congress it is only necessary to refer to the act 
of Congress under which the same was done. The act of March 3, 1879, chapter 180, 
section 6 (20 Stats. L., 355), provides as follows: 

“The Postmaster General shall request all railroad companies transporting the mails 
to furnish, under seal, such data relating to the operating, receipts, and expenditures 
of such roads as may, in his judgment, be deemed necessary to enable him to ascertain 
the cost of mail transportation and the proper compensation to be paid for the same; 
and he shall, in his annual report to Congress, make such recommendations, founded 
on the information obtained under this section, as shall in his opinion be just and 
equitable.’’ 

It will be seen from the above that the statutes require the ascertainment of the 
cost of transportation and the proper compensation to be paid for the same. 

Upon the further question of capitalization or basis of valuation the department 
had no information. 

In order to thoroughly meet and consider this feature of the question consideration 
has been given to it since the preparation of Document No. 105, and the Postmaster 
General has signified his willingness to recommend that, in addition to the operating 
expenses and taxes apportionable to the mail service and 6 per cent‘thereof, companies 
may be allowed such additional amounts, if any may be necessary, as shall render the 
whole a proper proportion of a fair and reasonable rate on the value of the property 
necessarily employed in connection with the mail service. 

Ilii. 

The second statement in the pamphlet in support of the propositions advanced is 
as follows: 

‘ ‘ The mail service supplied by the railways costs them more in operating expenses 
and taxes than they are paid for it, and leaves nothing for return on the property” 

(p. 6). 

In elaboration of this statement several positions are taken. The first is that the 
passenger-train services as a whole do not produce revenue sufficient to meet their 
fair proportion of the'operating cost and the necessary return upon investment and that 
the mail service, being only a part of the passenger service and producing a less rate 
of gross revenue per car-foot mile is therefore unprofitable. In support of their con¬ 
tention the pamphlet alleges substantially (1) that it is the general belief of railway 
managers that the passenger revenues are insufficient to meet these items, and (2) 
that the rate of gross receipts per car-foot mile received for the mail service is 3.23 
mills and for other services 4.35 mills. 

With respect to the first the department has no information which would warrant a 
conclusion, and as to the second it is to be observed that the rates given by the pam¬ 
phlet are rates computed by the railroad committee on railway-mail pay based entirely 
upon the companies’ statistics as to car space and mail service performed unchecked 
and uncorrected by the department, which results in the ascertainment of a larger per 
cent of car-foot miles to the mail service than is justified by the corrected data. The 
department’s figures show revenue from mail service of 4.14 mills per car-foot mile 
and for revenue from other services 4.16 mills per car-foot mile. 

From these figures it will be readily observed that the discrepancy between the mail 
and other services comprising the passenger services alleged by the pamphlet does not 
exist to the extent claimed. Furthermore, the pamphlet in this connection raises the 
interesting question which the railroad committee on railway mail pay does not touch 
upon, namely, how the question may be affected by the fact that their operating 
revenues for all passenger services (of which the mail is only a small part) do not pay 
operating expenses, taxes, and a fair return on the investment, and apparently are not 
expected by the companies to do so. 

The second position taken is that no merely statistical comparison can reveal the 
whole story, for the railways are required to furnish many incidental facilities and to 
perform many additional services for the Post Office Department which render the 
mail service exceptionally arduous and costly. 

In support of this the pamphlet sets forth the requirements of the postal regulations 
and the practice of the department regarding the receipt and delivery of mails en route 
supplying of rooms, etc. 

In reply to this it may be said that with respect to the passenger service, as well, the 
railroad companies furnish very elaborate and extensive facilities for the accomoda¬ 
tion, convenience, and safety of persons who patronize their passenger service. 

It should not be overlooked, however, that whatever facilities may be furnished by 
the railroad companies for the mail service will, under the plan proposed by the Post 
Office Department, be paid for upon the basis proposed. 


KAILWAY MAIL PAY. 


101 


In this connection, on page 7 of the pamphlet there is a statement which seems to 
be fully in line with the purpose of the inquiry, reported in Document No. 105. This 
statement is as follows: 

“The fairness of railway-mail pay can also be tested by apportioning operating 
expenses between passenger and freight traffic, and then making a secondary appor¬ 
tionment of the passenger expenses between mail and other kinds of traffic carried on 
passenger trains. This method involves charging directly to each kind of traffic all 
expenses pertaining exclusively thereto, and the apportionment, on some fair basis, 
of those expenses which are common to more than one kind of traffic.” 

This is the method which was substantially followed by the department. 

However, the pamphlet states that the railway companies arrived at the conclusion 
by this method—that the operating expenses, not including taxes, for conducting the 
mail service, were $4,009,184, as against the department’s figures for substantially like 
mileage, $2,676,503.75. It is to be observed from the statements of the pamphlet that 
in obtaining this result the railroads used the revenue train mileage for apportioning 
common expenditures for passenger and freight services, which, in the opinion of the 
authority consulted by the department, is not the best basis for such division in all 
cases, and used the percentage of car-foot miles made in the mail service for apportion¬ 
ing to the mail the passenger operating expenses, which was too high, because obtained 
by using the unchecked and uncorrected data before referred to. With respect to the 
use of revenue train mileage for the purpose named, the Wisconsin commission, in the 
case above cited, state as follows: 

“The revenue train-mile is the unit of work done in hauling trains between ter¬ 
minals, and it is the most direct unit of cost. That is, the passenger revenue train 
mileage is the most direct unit of those expenses which depend upon the same, and 
the freight revenue train mileage is the most direct unit of those expenses which 
depend upon this mileage. This is an important distinction, for the passenger-train 
mileage differs materially in cost as well as in many other respects from the freight- 
train mileage. * * * They evidently assume that passenger and freight train 
mileage stand for substantially the same thing and that this is the proper unit of all 
expenses. Even a superficial analysis of the facts will show that this is not the case. ” 

With respect to other statements subject to criticism set forth under this heading 
in the pamphlet, a discussion will be found under subsequent headings where they 
are more specifically referred to. 

III. 

The third statement in the pamphlet in support of the propositions advanced is as 
follows: 

“The Postmaster General’s apportionment of space between the mail service and 
the other services rendered on passenger trains did not allow to the mails the space 
which they actually require and use and this had the result of unduly reducing his 
estimates of the cost to the railways of the mail service” (p. 9). 

The rules adopted by the department in checking the reports of the railroad com¬ 
panies of space necessary for the mail service differed from the ideas of the railroad 
companies as to the proper amount of the space to be charged, but it is believed that 
the department’s rules were equitable and adhered closely to the actual conditions 
obtaining on the various trains. In order that there may be no doubt as to these 
rules they are here set forth in full: 

“closed-pouch space. 

“The following basis for the estimate of the space in baggage cars devoted to mail 
service for closed pouches during the month of November, 1909, in connection with 
the railroad companies’ reports, will be observed: 

“For 100 pounds or less, allow 6 linear inches; 

“For weights above 100 pounds and not exceeding 200 pounds, allow 10 linear 
inches * 

“For weights above 200 pounds, allow 5 linear i mhes for each additional 100 pounds. 

“The weight will be ascertained by multiplying the maximum number of pouches 
and sacks reported by the company as carried at any one time by the average weight 
of pouches and sacks as shown by the report of the General Superintendent, Railway 
Mail Service, upon the actual weighing for 10 days of closed pouches on express trains, 
namely, 20 pounds.” 

APARTMENT CAR SPACE, 

“Where the railroad reports cars longer than those authorized by the department, 
enter the authorized length in column 11, Form 2601, and enter the excess space in an 
additional column to be headed ‘Linear feet of the cars—dead space,’ and its car-foot 
mileage to be computed and entered in another additional column headed Lar-foot 
mileage—dead space.’” 


102 


RAILWAY MAIL PAY. 


RAILWAY POST OFFICE CAR SPACE. 

“Where the railroad company reports cars longer than those authorized by the 
department, the cases may be one of the following three characters: 

“ Full line authorized with maximum pay. —Where the space reported is greater than 
that authorized by the department, enter the authorized length in column 9, Foim 
2601, and the excess space in an additional column marked ‘Linear feet of cars—dead 
space’ and compute the car-foot mileage on the dead space and enter it in another 
additional column, marked ‘Car-foot mileage—dead space.’ 

“Agreement lines. —These cases are where the department authorizes a full line of 
cars (as, for instance, a 60-foot line), and the company operates such sized cars in both 
directions, but the department pays a rate equal to half the rate for a full line of the 
maximum length, plus one-half the rate for a full line of minimum length (as, for 
instance, pay equal to half a 60-foot plus half of a 50-foot or 40-foot line). «In this case 
enter the length of the line, as authorized, in column 11, Foim 2601. 

“ Half lines. —These are cases where the authorizations are for specific half lines (as, 
for instance, half line of 60-foot cars in one direction and half a line of 40-foot cars in 
the opposite direction). It is usual for the company to operate the maximum length 
of car in both directions. If, therefore, the company reports greater length than that 
authorized, enter the authorized length in column 11 and the surplus space reported, 
if any, in another column (additional), marked ‘linear feet of cars—deadhead space’ 
and compute the car-foot mileage upon the deadhead space and enter it in another 
additional column headed ‘Car-foot mileage—deadhead space.’ ” 

“ If a railway post-office car is reported deadhead and its running is necessary for the 
maintenance of the authorized car service, the space should be entered in the column 
‘Linear feet of cars—deadhead space’ and its car-foot mileage computed and entered 
in the column ‘Car-foot mileage—deadhead space.’ 

“ Milk car operated in passenger train. —Where a milk car is operated in a passenger 
train the car space should be treated as passenger car space. 

11 Railway post-office cars run beyond the points between which such service is duly 
authorized and paid for. —Where a company reports the operation of a full railway 
post-office car beyond the points between which the line is duly authorized, give 
credit in column 11 for the length of space necessary for apartment car service, if any 
be necessary, for the extra distance for which the car is so operated and enter the 
surplus space in the column ‘Linear feet of cars—dead space’ and carry the car-foot 
mileage for each to their appropriate columns. If no space is needed for apartment 
car service over the extra distance run, enter the entire space reported for such dis¬ 
tance in the column ‘Linear feet of cars—dead space’ and carry out its car-foot 
mileage.” 

The space ascertained to be “Deadhead space” under the foregoing rules was 
charged to the mail service, and formed part of the car-foot mileage percentage for 
that service. 

The assertion is made that “the Postmaster General obtained from the railways 
statements which he might have used in applying this method (the apportionment), 
and these statements showed that 9.32 per cent of the total space in passenger trains 
was required by the mails, but, instead of using the data showing this fact, he sub¬ 
stituted figures of his own which reduced the space credited to the mail service to 
7.16 per cent of the total.” The statement that the Postmaster General used figures 
of his own is incorrect. The figures used by the department were those furnished 
by the railroad companies, after being checked and carefully scrutinized under the 
rules hereinbefore set forth. The utmost care was exercised in verifying the reports 
of the companies,- and in case any change was made in the figures there was ample 
authority therefor. 

The railroad companies, generally, reported the space used by the mails at the 
maximum of operating conditions, whether warranted by the needs of the mail service 
or not. An examination of the instructions of the various companies to their employees 
in regard to reporting closed-pouch space indicates that no matter what the size of 
the baggage car utilized, the mail service, even if the mail was very light in weight 
and quantity, was charged with unused space in the baggage car proportional to the 
amount carried. The rule of the department to allow 6 linear inches across the 
entire car for 100 pounds of mail or less was based upon measurements and tests made 
by officials of the department and represented 18 linear inches by 36 inches upon 
one side of the car the full height of the car. This space is ample for 100 pounds of 
mail. 

The pamphlet further makes specific statements regarding the operating necessity 
for providing for the maximum traffic, although during much of the trip the actual 
traffic may be considerably below this limit, and states that the Postmaster General 
refused to credit the mail service with much of the space thus required by the depart- 


BAIL WAY MAIL PAY. 


103 


ment. This statement is incorrect, as will be fully perceived by an examination of 
the rules hereinbefore stated regarding the charges against the mail service for rail¬ 
way post-office car service. From these rules it will be noted that excess space was 
charged to dead space (that is, space which was afterwards charged to the passenger, 
not mail, service) only in cases where the company operated cars of greater length 
than authorized by the department, and also where the companies operated for their 
own purposes authorized lines beyond the points between which such lines were 
duly authorized to be run, and that in other cases, as, for instance, agreement lines 
and half lines, the excess space was charged to deadhead space and finally accounted 
for as a charge to the mail service. 

'iV.t 

The fourth statement in the pamphlet in support of the propositions advanced is as 
follows: 

“The Postmaster General ignored data which he had obtained showing expendi¬ 
tures on account of the mails largely in excess of the direct expenses for that service 
which he reported” (p. 11). 

In support of this the pamphlet contains the statement that the Postmaster General 
obtained from the railroad companies statements showing the amounts expended by 
them for station and terminal services required by the department, etc., which were 
not used, and that no adequate allowance was made in any other way for such unused 
items. It sets forth specifically an itemized statement of all items reported, aggre¬ 
gating $401,136. 

This statement contains two material allegations: (1) That no adequate allowance 
was made in any other way for the items that were not specifically used by the de¬ 
partment, and (2) that the total of all items which should be considered under this 
heading is as above stated. 3 hese will be considered separately and it will be con¬ 
venient to consider the second first. 

An examination of the items set forth on page 12 of the pamphlet immediately 
discloses the fact that they contain two specifications and the greater part of a third 
which are improperly included as operating expenses, namely, rental value, plus 
average monthly cost of light and heat, of room or rooms set apart for the exclusive 
use of the mail service, $37,258.93 (the part of this item improperly included is the 
rental value); rental value of tracks occupied daily for advance distribution of the 
mail, $47,029.12; and interest at the legal rate upon the value of cranes, catchers, and 
trucks required for mail service, $3,895.36. The total of these is $88,183.41. The 
part of this which represents the cost of light and heat of room or rooms set apart for 
mail service is not shown. Neither is it possible to apportion to the amount the 
proper proportion of the $9,993.19 stated in the footnote on page 12 of the pamphlet 
as having been reported by four companies which gave totals for these items but did 
not report the items separately. Therefore, the true amount representing operating 
expenses for station service, etc., is made up of the other items stated, namely, amount 
of wages paid to messengers and porters employed exclusively in handling mails, 
$79,980.84; portion properly chargeable to mail service, prorated, etc., $198,927.01; 
amount expended for maintenance of horses and wagons, etc., $5,640.98; and average 
monthly cost of light and heat for postal cars placed daily for advance distribu¬ 
tion of mail, $18,400.57; making a total of $302,949.40. This would be augmented 
by the unseparated amount for cost of lighting and heating rooms and the due 
proportion of the $9,993.19 above referred to. 

It will be observed from this that the statement in the pamphlet as to the amount 
which should have been accounted for is over $88,000 too much (not accounting for 
the undetermined items above referred to). Furthermore, the items making up the 
total of $302,949.40 had not been checked by the department, and it is to be remem¬ 
bered that they rest wholly upon the statements of the companies. That the largest 
item among them, namely, $198,927.01, the portion said to be properly chargeable to 
mail service, prorated on the basis of actual time employed, is largely in excess of a 
proper charge is shown by the following facts: Notwithstanding the statement made 
m the pamphlet that this item is the portion properly chargeable to mail service, “pro¬ 
rated on the basis of actual time 1 employed, of wages paid to station employees a part 
of whose time is employed in handling mails,” the instructions given by the railroad 
committee on railway-mail pay (the committee which prepared the pamphlet under 
consideration) to the companies they represented contain the following w T ith reference 

to this item: .. 

“In computing the pay of station employees and time consumed in handling mails 
30 minutes should be allowed for each train exchanging mails, and, in addition, the 


i Italics are department’s. 




104 


RAILWAY MAIL PAY. 


mail time should be charged with its proper proportion of idle time of agent or em¬ 
ployee handling mails; same proportion to be added in transfer trips to other stations.” 

In the light of this instruction the department, in fairness to the Government, could 
have made no specific use of the item under consideration. 

Furthermore, the item contained on page 12 of the pamphlet, “Amount of wages 
paid to messengers and porters employed exclusively in handling mails, $79,980.84,” 
appears also to be evidently excessive in the light of the instructions given by the 
railroad committee representing the companies and who prepared the pamphlet, as 
follows: “Where solely on account of handling the mails an additional person has been 
employed, his whole pay should be shown in column 3, even though after employment 
he may perform some other work incidentally.” This instruction is directly contrary 
to the theory otherwise insisted upon by the companies that the mail service should 
bear its proportion of expenses, inasmuch as it charges to the mail service the entire 
amount paid for the employment of exclusive porters, even though they performed 
duties for the passenger service. 

As to the first part of the statement, to the effect that in the data furnished for 
messengers, porters, and station service which were not specifically used by the 
department, there was no adequate allowance made in any other way, this will now 
be examined. 

It will appear evident that no items for these expenditures could be used specifi¬ 
cally unless the individual accounts including such direct expenditures were also 
segregated and reported separately to the department in order that when the appor¬ 
tionment of expenditures on the car-foot mile basis should be made the department 
should not participate in a double charge for the same service. Therefore the depart¬ 
ment assigned to the mail service such expenses for these items as were reported by 
the companies in this manner; that is, where not only the direct expenditures were 
reported, but also the expenditures for the accounts including such direct expendi¬ 
tures were also reported separately from other expenditures for like accounts. In 
this manner $21,993.06 was reported by the companies and directly assigned to the 
mail service, as shown in Table 7, Document No. 105, and the totals of the accounts 
including them were eliminated from the totals for station service for the respective 
systems. Having thus disposed of the direct expenditures which could be used in 
this manner and ascertained the sum of such like expenses unaffected by the already 
assigned direct expenditures, this sum was apportioned to the mail service on the 
basis of the car-foot miles performed in that service. The total of the amount directly 
assigned, as above stated, and the amounts apportioned upon the car-foot mile basis 
for all roads reporting, was $167,813.39. It will be recognized that any other method 
of handling the items would have resulted in a double charge to the Government, 
because if the amounts reported by the companies'directly expended on account of 
the mail service had been charged to that service, and then the accounts affected 
included in the total amounts apportioned, it is readily seen that the mails would 
be charged twice for the same service performed by the companies. This would have 
been the result had the department followed the plan suggested by the railroad com¬ 
mittee, as set forth in the pamphlet, even though the amounts named could have 
been verified or corrected. 

Regarding the claim that the cost of personal transportation furnished the Post 
Office Department was not allowed for, it may be said that after a careful consideration 
of this matter it was decided in view of the inability to satisfactorily verify the data 
of this character reported by the companies and the fact that similar data regarding 
the passenger service was lacking, the data could not be made use of for the purpose 
of the inquiry. 

V. 

The fifth statement in the pamphlet in support of the propositions advanced is as 
follows: 

“The month of November is not a fair average month in any railway year or one that 
is typical of a year’s business, and its use as the sole basis of the Postmaster General’s 
calculation was so unfavorable to the railways as to deprive the results of any value 
even if in all other respects his methods were beyond criticism” (p. 13). 

To support this the railway committee assert that November is not a typical or 
average month, that all its deviations from the averages of the year are such as to 
greatly favor a finding disadvantageous to the companies, and specifically mention 
that the maintenance of way and structures expenditures for the month of November, 
1909, were lower than the average for the year, and that the traffic on passenger trains 
was lighter and the freight traffic heavier during that month than for the average of 
the year. From this the committee conclude that the proportion of operating ex¬ 
penses assigned to the passenger service was lower than the average for a month in the 


RAILWAY MAIL PAY. • 105 

year and that, therefore, the part of such expenditures assigned to the mail service 
was lower than the average for a month of the year. 

At the time the preparations were completed for securing the statistics from the 
railroad companies, the month of November, 1909, appeared to be the first available 
month which would probably produce the fairest result, and it was accordingly ac¬ 
cepted. As to whether the result was as alleged by the railroad committee will de¬ 
pend upon consideration of more factors than have been set forth by that committee 
in the pamphlet under consideration, and these additional facts do not appear to sup¬ 
port the conclusion of the pamphlet. If it is true that during the month of Novem¬ 
ber the passenger traffic was reduced below the average for the year, it is fair to con¬ 
clude that there was a corresponding reduction in the operation of purely passenger 
trains. This would appear to be substantiated by a comparison of statistics of the 
Interstate Commerce Commission with the department’s statistics for November, 1909, 
as to car and train mileage; that is to say, the Interstate Commerce Commission report 
shows the average monthly car miles for 1910 to be 249,847,541 for all roads. The 
department’s statistics for November, 1909, show the car miles for the roads reporting 
(practically all the large systems) as 219,733,424. Again, the Interstate Commerce 
Commission report shows the average monthly train mileage for 1910 as 45,751,250, 
and the department’s statistics for November, 1909, show the train mileage for the 
roads reporting as 42,896,628. From this it must be concluded that the car miles and 
train miles of passenger service performed by the railroad companies in the month of 
November, 1909, were below the monthly average for a year, and therefore the car- 
foot miles for the passenger service for November would be less than the average of the 
year. If this was true the effect of it was to increase above the average the rate of 
percentage of car-foot miles in the passenger services devoted to the mail service, 
because the actual space devoted to the mail service in passenger trains is compara¬ 
tively constant and would not be reduced during the month of November, but on the 
other hand would inevitably be increased during that month. 

Consequently, if the total car-foot miles for all the passenger services were below the 
average and the mail car-foot miles were the average or above the same, thus resulting in 
a larger ratio for the mail service in the participation in the expenditures for the passen¬ 
ger services, it can not be maintained that the selection of November was disadvanta¬ 
geous to the railroad companies unless the apparent disadvantage to the mail service be 
overbalanced by other factors having a contrary effect. That the volume of the mails 
for November was actually above the average is shown by statistics. The postal reve¬ 
nues from 50 of the largest post offices for the fiscal year ended June 30, 1910, by 
months, indicated that the month of November exceeded all other months in the year 
in postal receipts except the months of March and December. The receipts for Novem¬ 
ber were 8.48 per cent of the total for the year, or 0.15 of 1 per cent above the average. 
Statistics compiled in the department as to the weights of second-class matter (which 
comprise the large percentage of the mails), by months, show that November is fourth 
among the months in the quantity handled. ' Figures secured from a number of large 
offices fot a period of five years show the monthly average weight to have been 
29,609,438 pounds, and the November weight 30,064,002 pounds, or 454,644 pounds 
more than the average. Inasmuch as the space used for the mail service aside from 
the specific authorizations of space in cars increases as the weight increases, it follows 
that more than the average space and car-foot miles are necessary for mail service in 
November, and therefore, even if the passenger car-foot miles were not below the 
average, and thus increase the ratio of the mail car-foot miles, this increase in weight 
of mails’ in November would result in a greater participation of the mails in the pas¬ 
senger operating expenses than in the average month. 

YI. 

The sixth statement in the pamphlet in support of the propositions advanced is as 

“A commission of Senators and Members of Congress which, between 1898 and 1901, 
most fully and carefully investigated the subject, ascertained and declared that rail¬ 
way mail pay was not then excessive; since then there have been many and extensive 
reductions in pay accompanied by substantial increases in the cost and value of the 
services rendered by the railways” (p. 14). ' A A , 

Under this heading the statement in the pamphlet refers to the tact that a congres¬ 
sional joint commission reported in 1901 that the prices then paid to railroad companies 
for the transportation of the mails were not excessive, and sets forth the further tacts 
that since 1901 the ratio of railroad mail pay to the gross postal receipts per annum has 
decreased, and that certain reductions have been made by statutes and administrative 
order and changes which have lowered the mail income per unit of weight. 


106 


BAILWAY MAIL PAY. 


The findings of the joint commission referred to must be considered, if at all at this 
time, in connection with the findings of Document No. 105, based upon a line of in¬ 
quiry quite different from that pursued previously. The finding of the commission 
made no discrimination with respect to the services performed by the different sys¬ 
tems or roads, while the inquiry upon which Document No. 105 is based disclosed 
for the first time that the present system of adjustments resulted in an ununiform 
measure of compensation to the several companies, the result in some cases being a 
loss and in other cases a gain over cost of operation. 

There appears to be even less relevancy to the question to be found in the ratio 
between total railroad mail pay and the gross postal receipts of the department. The 
inferential argument in the statistics presented appears to be that there is a necessary 
relation between the compensation paid railroad companies for carrying the mails 
and the gross receipts of the postal establishment, and, further, that the railroad 
companies have some right to receive a proportional increase in compensation for 
carrying the mails if the gross revenues of the department increase. Neither of these 
propositions is true. The sources of revenue to the postal establishment are various 
and are not necessarily connected with the expenditure for transportation on rail¬ 
roads. It is true that the expenditure for transportation on the railroads increases 
as the weights of the mails increase, but the rate of increase in such pay is not neces¬ 
sarily the same as the rate of increase in postage. Furthermore, there are sources of 
revenue which are entirely disassociated from the functions involving transportation. 

With respect to the items of reduction enumerated on page 16 of the pamphlet it 
may be said that one at least is not susceptible of verification, and as to all of them 
they appear to be immaterial except as a part of the argument to show that if the 
finding of the commission in 1901 was true it is with greater force true to-day. This 
may be passed with no further comment than what has been made above. 

VII. 

The seventh statement in the pamphlet in support of the propositions advanced is 
as follows: 

“The administration of the Post Office Department has not, in the last 12 years, 
effected any reduction in the annual total of its expenses for other purposes than 
railway transportation or in the proportion of its revenues required for such other 
expenses. But the whole saving which has nearly eliminated the annual deficit of 
the department is represented by the reduced payments, per unit of sendee, to the 
railways” (p. 17). 

To support this proposition the pamphlet sets forth certain statistics of gross receipts 
and total expenditures compared with total expenses for railroad mail service and for 
other purposes separately for the years 1901 and 1911. The fallacy of this line of 
argument, so far as a comparison between receipts of the postal establishment and 
expenditures for railroad mail service is concerned, has been fully shown under 
preceding subdivisions. Any argument based upon comparison of gross expenditures 
with the expenditure for railroad mail service or any other one item is equally fal¬ 
lacious. If the subject matter remains the same year after year, or if in 1911 it*was 
substantially the same as it was in 1901, its conditions are sure to vary, as, for instance, 
Congress increases from time to time the compensation paid post-office clerks, railway 
post-office clerks, assistant postmasters, etc., so that the increase in expenditures 
never necessarily represents a true gauge for measuring the increase in the business 
of the postal establishment. It is evident that nothing can be proved by an argument 
of this character. 

VIII. 

The eighth statement in the pamphlet in support of the propositions advanced is 
as follows: 

“The continuous refusal of the Post Office Department to order reweighings of the 
mails except after the maximum interval of four years which the law allows, the de¬ 
mands for station and terminal services that are rendered without any or without 
adequate compensation and the unjust discrimination against compartment cars 
used as railway post offices are all abuses, seriously injurious to the railways, which 
have grown up under the present system of payment and ought at once to be reme¬ 
died” (p. 18). 

The statements in the pamphlet under this heading are substantially (1) that Con¬ 
gress in providing that the mails shall be weighed not less frequently than once in 
every four years intended that they should be weighed whenever a substantial change 
in volume had taken place; (2) that the present basis of payment plainly does not 
contemplate the performance of side service by the companies between stations and 


RAILWAY MAIL PAY. 


107 


post offices as required by the department; and (3) that Congress provided for addi¬ 
tional payment for full railway post-office cars, but when the practice of requiring 
portions of cars for the same service was inaugurated no provision for payment there¬ 
for was made. 

With respect to the periods of adjustment following weighings it may be said that 
the railroad contract service developed in connection with the contract service for 
carrying the mails otherwise—that is, on star routes and on steamboat routes—the con¬ 
tract period for which has uniformly been four years. Formal written contracts, 
where they could be obtained, were entered into with the railroad companies for 
four-year periods corresponding with the periods of service on star routes in the same 
contract sections prior to 1873. By the law of 1873 the basis of paying for railroad 
mail service was entirely changed, and that statute prescribed the present plan based 
upon the average daily weight of mails carried over the whole length of the route, 
such average daily weights to be ascertained by a weighing of the mails not less fre¬ 
quently than once in every four years. Following the passage of the law of 1873 the 
department inaugurated its mail weighings for readjustments on the quadrennial 
plan, or not less frequently than once in every four years, which general plan has 
been adhered to ever since. It is understood, however, that re weighings were ordered 
from time to time when conditions upon routes radically changed during the quad¬ 
rennial term, but the quadrennial term remained as first inaugurated. 

With respect to the second contention, namely, as to the performance of side service, 
the railroad committee is clearly wrong so far as the original intention of the statute 
forming the present basis is concerned. The requirement made of railroad companies 
to perform the service is of long standing and in some form appears to antedate the 
passage of the act of 1873, which is the basic law for the present plan of readjustments, 
and continued thereafter without interruption, and with only variations in the manner 
of the requirement, to the present day. As to whether or not Congress had it in con¬ 
templation when the law of 1873 was passed has teen considered by the courts and 
decided in the affirmative. In the case of the Jacksonville, Pensacola & Mobile Kail- 
road Co. v. The United States, decided by the Court of Claims in 1886 (21 C. Cls., 155), 
the company attempted to recover specific compensation for performing this character 
of service. This claim was denied by the court, which, in deciding the case, said as 
follows: 

“ For a long period of time, extending back to the first establishment of the lailroad 
mail service, it has been the practice to include the delivery of the mails within 80 
rods of railway stations as part of the railroad route, and that has been promulgated in 
all advertisements for proposals and in the official regulations published by authority, 
as shown by Finding XI. A requirement to that effect was inserted in the claimant’s 
written contract (see first of the numbered articles at the end thereof, in contract set 
out in Finding II). and was no doubt in all written contracts. 

“Such a well-established practice, in our opinion, must have been considered by 
Congress in fixing the maximum compensation, and by the Postmaster General in 
making his orders allowing the full amount of the maximum, and therefore the pay for 
such service must be held to be included in the general compensation fixed for the 
routes.” 

This decision of the Court of- Claims was affirmed by the Supreme Court in 118 United 
States, 626. 

With respect to the third contention, regarding payment for apartment cars, it 
would be inferred from the language used in the pamphlet that when Congress pro¬ 
vided specific additional compensation for full railway post-office cars there was no 
apartment-car service in existence and that the requirement to operate apartment 
cars was made afterwards and with no additional compensation, of which complaint 
is made in the pamphlet. The facts are that apartment-car service existed long before 
full railway post-office car service, and the Postmaster General was authorized by the 
act of 1872 (17 Stat. L., 309) to compensate railroad companies who furnish railway 
post-office cars by allowing such additional compensation beyond that allowed for the 
service as he might see fit, not exceeding, however, 50 per cent of such rates. It was 
not until the law of 1873 that Congress afterwards authorized specific additional pay¬ 
ment to the transportation pay for full railway post-office cars. This statute, however, 
repealed the act of 1872 and left the Postmaster General without authority to make 
specific payment for apartment cars. 

As to the question whether, under a proper system of readjustment which shall be 
entirely just and fair to both the Government and the railroad companies, the latter 
should not be fully compensated for the service they perform from year to year, as 
well as the special services between stations and post offices and for the furnishing of 
apartment cars, there is no difference of opinion between the railroad companies and 
the department, and the plan as a basis for readjustment which has been suggested 
in Document No. 105 makes full provision for these features. 


108 


RAILWAY MAIL PAY. 


IX. 

The ninth statement in the pamphlet in support of the propositions advanced is as 
follows: 

“The Postmaster General’s proposed plan of payment based upon operating cost 
and taxes, to be ascertained by the Post Office Department, plus 6 per cent, is seriously 
wrong in principle and would encourage and perpetuate injustice” (p. 20). 

The statements contained in the pamphlet in support of this proposition are sub¬ 
stantially (1) that the operating expenses and taxes plus 6 per cent of the sum of 
these expenses and taxes constitute an insufficient basis for remuneration for the 
service, (2) that the basis of cost would be unfair to the economically conducted 
road as against the road otherwise conducted, and (3) that the Post Office Depart¬ 
ment should not be given the power of apportioning the operating expenditures 
between the freight and passenger services. 

The first objection has been fully answered hereinbefore. 

With respect to the second objection, it may be said that it hardly appears to be 
of great force, in view of the concession of the department that the basis for com¬ 
pensation should take into consideration not only cost and taxes but, in addition, 
railroads may be allowed such additional amounts, if any be necessary, as shall render 
the whole a proper proportion of a fair and reasonable return on the value of the prop¬ 
erty necessarily employed in connection with the mail service. 

With reference to the third objection, the Postmaster General has signified his 
willingness to recommend as a part of the plan of readjustment proposed that the 
Interstate Commerce Commission, instead of the Postmaster General, shall be author¬ 
ized to make the separation of operation expenses between the passenger and freight 
services. 

X. 

CONCERNING THE SPECIFIC REPLY OF THE RAILROAD COMMITTEE ON RAILWAY MAIL 

PAY TO THE CHAIRMAN OF THE SENATE COMMITTEE ON POST OFFICES AND POST 

ROADS. 

The foregoing relates to the main body of the document prepared and submitted by 
the railroad committee. Appended to the document, however, and marked “Appen¬ 
dix G,” is set forth a letter addressed to the chairman Senate Committee on Post Offices 
and Post Roads, and signed by “committee on railway mail pay,” etc., in which 
specific replies are made to certain inquiries submitted by the chairman. The sub¬ 
stance of the replies appears to be that the companies represented by the railroad com¬ 
mittee prefer the present plan of adjusting pay, with certain modifications, namely, 
annual weighings, relief from performance of side service, and payment for apart¬ 
ment car service. 

No specific reply from the department is needed to the statements and contentions 
set forth in this letter other than are submitted above in reply to the general body of 
the pamphlet. However, it should be further stated that the railroad committee on 
railway mail pay has entirely failed to notice a fact of fundamental importance shown 
in Document No. 105, namely, that under the present system of paying for railroad 
mail service the compensation that can be allowed under the law to some railroad com¬ 
panies is inadequate, and probably less than the cost of performing the service. This 
feature of the results of Document No. 105 is, as we understand, undisputed by the 
railroad committee on railway mail pay. It is therefore difficult to understand how 
any system for compensating the railroad companies for carrying the mails can be 
considered the most desirable if it does not fully compensate each railroad company 
for the service rendered the Post Office Department. The present plan does not do 
this, whilst the plan proposed by the Postmaster General in Document No. 105 seeks 
to do it. 

Joseph Stewart, 

Second Assistant Postmaster General. 

PLAN AS MODIFIED BY DEPARTMENT. 

On January 24, 1913, I received a letter from the Postmaster 
General, dated January 20, 1913, submitting draft of a proposed bill 
incorporating his modified views regarding the general plan for 
readjusting railway mail pay. 


RAILWAY MAIL PAY. 


109 


This letter and draft read as follows: 

Post Office Department, 

Office of the Postmaster General, 

Washington , D. C., January 20, 1913. 

Hon. Jonathan Bourne, Jr., 

Chairman Committee on Postage on Second-Class Mail Matter and 

Compensation for the Transportation of Mail, 

Congress of the United States. 

My Dear Mr. Chairman: Referring to your letter of the 6th instant, regarding 
certain proposed modifications of the general plan outlined in House Document No. 
105 for readjusting mail pay, and to my reply of the 9th instant, in which I recom¬ 
mended certain legislation in connection therewith and stated that such modifica¬ 
tions of the phraseology of the proposed law as were found necessary to effect the 
changes recommended would be prepared as early as practicable, I have the honor 
to submit herewith an amended draft of the proposed legislation. 

Yours, very truly, 

Frank H. Hitchcock, 

Postmaster General. 


Tentative Draft of Proposed Law for Regulation of Railway Mail Pay. 

The Postmaster General is authorized and directed to require companies operating 
railroads by steam, electricity, or other motive power, carrying the mails to furnish, 
under oath and seal, not less frequently than once in each fiscal year, such information 
relating to the service, operation, receipts, and expenditures, and such other infor¬ 
mation of such roads for a period of not less than thirty days, to be designated by him, 
as may in his judgment be deemed necessary to enable him to ascertain the cost to 
the companies of carrying the mails on their respective roads and the proper com¬ 
pensation to be paid for that service. He shall require all such companies to submit 
such information not later than March first, nineteen hundred and fourteen, and in 
each fiscal year thereafter, at such times and for such periods as he shall prescribe. It 
shall be the duty of such railroad companies to furnish such information, and if any 
railroad company fails or refuses to do so when required its compensation for service 
rendered thereafter until such company shall comply and an adjustment is made by 
the Postmaster General shall be forfeited to the United States and shall be withheld 
as liquidated damages. 

If any officer, agent, or employee of a railroad company shall knowingly furnish any 
information required under the provisions of this act that is false and fraudulent he 
shall be fined not more than twenty thousand dollars and imprisoned not more than 
five years. 

The Postmaster General shall determine the cost to each railroad company of carry¬ 
ing the mails on its respective road or roads, and shall verify and state the result in 
such form and manner as he shall deem proper. For this purpose he shall transmit 
the information furnished by the railroad companies relating to the operating expendi¬ 
tures to the Interstate Commerce Commission, who shall credit, assign and apportion 
such operating expenditures to the passenger and freight services, and report the result 
as to the passenger service to the Postmaster General. The Postmaster General is 
authorized to credit, assign, and apportion the passenger operating expenses as reported 
to him by the Interstate Commerce Commission, and the taxes in such manner as will 
determine the proportion thereof chargeable to the mail service, a statement of which 
shall be given the company concerned. If any railroad company shall object to the 
method of crediting, assigning, and apportioning the passenger operating expenses 
and taxes to the mail service, it may file objection with the Postmaster General within 
twenty days after such statement is made to the company, and the Postmaster General 
shall thereupon certify the method and objection and such papers as in in his judgment 
may be essential to an understanding of the method, to the Interstate Commerce 
Commission, who shall review the finding of the Postmaster General and affirm, 
modify, or revise the same, and certify the result to the Postmaster General, which 
action thereon shall be final. 

The Postmaster General is authorized and directed to readjust the pay to companies 
operating railroads for the transportation and handling of the mails and furnishing 
facilities in connection therewith, not less frequently then once in each fiscal year, com¬ 
mencing with July first, nineteen hundred and fourteen, at a rate of compensation per 
annum equal to the cost to the railroad companies of carrying the mails as ascertained 
by him, and six per centum of such cost; in addition, companies may be allowed such 
additional amounts, if any be necessary, as shall render the whole a proper proportion 
of a fair and reasonable return on the value of the property necessarily employed in 



110 


RAILWAY MAIL PAY. 


connection with the mail service: Provided, That when such sum does not equal $25 
per mile per annum, he may, in his discretion, allow not exceeding such rate. 

Railroad companies whose railroads were constructed in whole or in part by a land 
grant made by Congress, on the condition that the mails should be transported oyer 
their roads at such price as Congress should by law direct, shall receive not exceeding 
the cost to them of performing the service. 

Information shall be furnished and adjustments made as nearly as practicable by 
accounting systems or roads, and the cost and the compensation for the term shall be 
stated for all service covered by each system or road. The routes for a system or road 
may be stated for administrative purposes in such manner as the Postmaster General 
may determine. 

The Postmaster General may order new or additional service during a term for 
which an adjustment shall have been made or service authorized on any system or 
road in any train operated by such system or road over any part of the trackage 
included in the adjustment or authorization, and without additional compensation 
therefor during such term. 

He may order service over new or additional trackage of an adjusted system or road 
during a term and state the amount performed for the remainder of such term on sta¬ 
tistics obtained for the first thirty days of service. Payment therefor may be made 
at not exceeding the average rate per car-foot mile for the system or road ascertained 
at the regular adjustment. Entire discontinuance of service over trackage included 
in the adjustment or thereafter added shall be deducted for at the car-foot mile rate 
of adjustment or mile rate of authorization. In case the operation of service over 
trackage included in an adjustment or thereafter added is undertaken by another 
company during the term, the same may be recognized by the Postmaster General, 
provided the companies in interest shall file with him their joint agreement as to the 
part of the compensation of the old operating company to be paid the new operating 
company; otherwise payment to the company first authorized shall be full payment 
for all service performed for the term. 

The Postmaster General may order service over trackage of a railroad company not 
operating service under an adjustment or authorization after the regular adjustment 
for the remainder of the term, and pay therefor at not exceeding $42.75 per mile of 
trackage per annum. 

Service over property owned or controlled by a terminal company shall be con¬ 
sidered service of the roads or systems using such property and not that of the terminal 
company. 

Railroad companies carrying the mails shall furnish all necessary facilities for car¬ 
ing for and handling them while in their custody. They shall furnish all cars or parts 
of cars used in the transportation and distribution of the mails, and place them in 
stations before the departure of trains when required to do so. They shall provide 
side, terminal, and direct transfer service and all station and depot space and rooms 
for handling, distribution, and transfer of mails en route, and for offices and rooms 
for the employees of the postal service engaged in such transportation when ordered 
by the Postmaster General. 

Every railroad company carrying the mails shall carry on any train it operates and 
without extra charge therefor the persons in charge of the mails, and when on duty 
and traveling to and from duty, all duly accredited agents and officers of the Post 
Office Department and the postal service, while traveling on official business, upon 
the exhibition of their credentials. 

All cars or parts of cars used for the Railway Mail Service shall be of such construc¬ 
tion, style, length, and character, and furnished in such manner as shall be required 
by the Postmaster General, and shall be constructed, fitted up, maintained, heated, 
lighted, and cleaned by and at the expense of the railroad companies. No payment 
shall be made for service by any railway post office car which is not sound in material 
and construction, and which is not equipped with sanitary drinking-water containers 
and toilet facilities, nor unless such car is regularly and thoroughly cleaned. No pay 
for service shall be allowed for the operation of any wooden railway post office car 
unless constructed substantially in accordance with the most approved plans and speci¬ 
fications of the Post Office Department for such type of cars, nor for any wooden railway 

E ost office car run in any train between adjoining steel or steel underframe cars, or 
etween the engine and steel or steel underframe car adjoining. After the first of 
July, nineteen hundred and seventeen, the Postmaster General shall not approve or 
allow to be used or pay for any full railway post office car not constructed of steel or 
steel underframe or equally indestructible material, and not less than twenty-five 
per centum of the railway post office cars of a railroad company not conforming to this 
provision shall be replaced with cars constructed of steel annually after June, nineteen 
hundred and thirteen; and all cars accepted for this service and contracted for b\ the 
railroad companies after the passage of this act shall be constructed of steel. The 


RAILWAY MAIL PAY. 


Ill 


Postmaster General shall made deductions from the pay of the railroad companies 
on the basis of the value of the service computed on the car-foot mile basis in all cases 
where the cars do not comply with the provisions of this act. 

The space in cars devoted to the use of the mails, as ascertained during the period 
fixed by the Postmaster General for the rendition of information by the railroad com¬ 
panies, shall be taken as the basis for computing the car-foot miles devoted to the mail 
service for the purpose of readjustment, effective from the 1st of July next following: 
Provided , That no credit shall be given for space in cars devoted to the distribution of 
the mails unless such space shall be authorized by the Postmaster General or unless 
he shall determine that its use is made necessary by a specific authorization. In 
computing the car-foot miles, the mail service shail be charged in both directions for 
a line of railway post-office cars with the maximum space authorized in either direction. 

If any railroad company shall fail or refuse to provide cars or apartments in cars for 
distribution purposes when required by the Postmaster General, or shall fail or refuse 
to construct, fit up, maintain, heat, light, and clean such cars and provide such appli¬ 
ance's for use in case of accident as may be required by the Postmaster General, it 
shall be fined such sum as shall, in the discretion of the Postmaster General, be deemed 
proper. 

The Postmaster General shall in all cases decide upon what trains and in what 
manner the mails shall be conveyed. Every railroad company carrying the mails 
shall carry on any train it operates all mailable matter directed to be carried thereon. 
If any railroad company shall fail or refuse to transport the mails when required by the 
Postmaster General upon any train or trains it operates, such company shall be fined 
such amount as may, in the discretion of the Postmaster General, be deemed proper. 

The Postmaster General may make deductions from the pay of railroad companies 
carrying the mails under the provisions of this act for reduction in service or frequency 
of service where, in his judgment, the importance of the facilities withdrawn or 
reduced requires it, and impose fines upon them for delinquencies. He may deduct 
the price of the value of the service in such cases where it is not performed, and not 
exceeding three times its value if the failure be occasioned by the fault of the railroad 
company. 

The Postmaster General is authorized to have such weights of mails and measure¬ 
ments of space taken and to collect such other information by sworn employees of the 
Post Office Department as he may deem necessary and to have such information stated 
and verified to him by such employees, under such instructions as he may consider 
just to the Post Office Department and the railroad companies, to assist in the ascertain¬ 
ment of the space used for the transportation and the handling of the mails on rail¬ 
roads, and to employ such special clerical and other assistance as shall be necessary 
to carry out the provisions of this act, and to rent quarters in Washington, District of 
Columbia, if necessary, for the clerical force engaged thereon, and to pay for the same 
out of the appropriation for inland transportation by railroads. 

The provisions of this act shall apply to service operated by railroad companies 
partly by railroad and partly by steamboats. 

The provisions of this act respecting the rate of compensation and the determina¬ 
tion thereof shall not apply to mails conveyed under special arrangement in freight 
trains, for which a rate not exceeding the usual and just freight rates may be paid, in 
accordance with the classifications and tariffs approved by the Interstate Commerce 
Commission. 

It shall be unlawful for any railroad company to refuse to carry the mails at the 
rates of compensation provided by law when and for the period required by the 
Postmaster General so to do, and for every such offense it shall be fined not exceeding 
$5,000. 

All laws or parts of laws inconsistent herewith are hereby repealed. 

By the adoption of the course above outlined and the consequent 
securement of the information herewith submitted, we now have 
before us the respective viewpoints of the Post Office Department, 
through its administrative representatives, and the transportation 
companies with whom the Government has mail contracts. The 
attitude of the department having just been made Ipiown, no time 
has been lost by the failure of the committee to organize sooner. We 
are now able to proceed as a committee in the study of one of the 
problems submitted to us in that provision of the act of August 24, 
1912, constituting the committee. 

Respectfully, yours, Jonathan Bourne, Jr., 

Chairman. 


x 




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